VCM Reaches Towards $2 Billion in 2021:
New Market Analysis Published from Ecosystem Marketplace

03 August 2022 | 2021 was a historic, record-breaking year for the Voluntary Carbon Markets, and 2022 is off to a fast-paced start. With the VCM now around the $2 billion mark, this much-anticipated The State of the Voluntary Carbon Markets 2022 Q3 briefing, “The Art of Integrity.” 

The briefing offers a synthesis of EM’s wealth of all EM Respondent reported VCM carbon credit trade data for 2021 (and updates to 2020), a 6X increase in annual market data over 2019.

The VCM grew in value towards $2 Billion in 2021. This quadrupling in market value from 2020, and doubling from our last market update during COP26, was driven by an acceleration of nature-based solutions trading volume and higher prices for these and other projects with non-carbon environmental and social benefits, such as clean cookstoves and water purification devices.

From developers to investors and buyers, VCM data interests are becoming increasingly granular. Over the past several months, EM has been busy investing in upgrades to its data systems and analytical tools, applying new QAQC practices to the data, and updating its project typology and category classifications to capture the astonishing diversity of +170 project credit types from nearly 100 countries reported to us for transactions in 2020-2021.

“Quality” and “integrity” are buzzwords in the voluntary carbon markets right now. Our position has always been that transparency is fundamental for high-quality, high-integrity markets. As the markets get larger and more complex, our goal is to make sure that markets deliver real climate impact, that high-quality projects are priced and valued accordingly, and that corporate climate action actors understand their full range of options.

EM’s work is accelerating, and collaboration is essential. With new initiatives, such as the ICVCM and VCMI offering integrity guidance and principles, and the overall bullish outlook of the VCM creating the wind at our backs, EM humbly leans into its increasingly critical role as a neutral and independent nonprofit initiative driving end-to-end trade transparency in what is still a largely disaggregated, over the counter market.

We look forward to working with our growing global network of EM Respondents, Visionary Partners, Strategic Supporters, Data Partners, and new collaborators to continue to expand and strengthen our coverage of credit sales from project developers and intermediaries.

Stay tuned for our next State of the VCM briefing as EM Respondents are currently reporting 2022 data. More up-to-date, in-depth, and cross-cutting data to be published in September during Climate Week NYC.

The Integrity Council for the Voluntary Carbon Market Launches its Public Consultation for Core Carbon Principles

27 July 2022 | It’s official. The Integrity Council for the Voluntary Carbon Market (ICVCM), which encompasses deep and varied expertise from across the voluntary carbon market ecosystem including world-leading scientific, financial, practitioner, NGO, policy, indigenous, local and other forms of knowledge, has today announced the start of the public consultation for the draft Core Carbon Principles, Assessment Framework and Assessment Procedure.

What is the consultation for and how long do you have to provide feedback?

The aim of the core carbon principles are to set a definitive and consistent benchmark for credible, high-integrity carbon credits. With a deadline of 27 September 2022, it’s a 60-day public consultation on its draft Core Carbon Principles (CCPs), Assessment Framework and Assessment Procedure.

The draft Assessment Procedure sets out a proposed process for assessing CCP-eligibility, how eligible carbon credits will be tagged; how the Integrity Council will continue to oversee and enforce the CCPs; and facilitate the continual development of the voluntary carbon market.

Learn more about how to get involved on the ICVCM’s website: https://icvcm.org/public-consultation/

Public Briefing Sessions

The ICVCM will be sharing more details on the consultation period, CCPS, and Assessment Framework during these public briefing sessions. Hear from Annette Nazareth, former SEC Commissioner and Chair of the ICVCM Governing Board, as well as a selection of other fantastic speakers.

Session 1: Wednesday 27th July 14:00 – 14:45 (BST): Register for the briefing on the 27th July

Session 2: Tuesday 2nd August 14:00 – 14:45 (BST): Register for the briefing on the 2nd August

This is a developing article. More content will be added over the course of the day and coming days.

Announcing FSC and Ecosystem Marketplace collaboration

Ecosystem Marketplace has recently signed a three-year agreement with Forest Stewardship Council (FSCGD GmbH) to collaborate and develop shared insights regarding carbon markets and non-carbon benefits as they pertain to FSC certified forests.  For more than 25 years FSC has pioneered forest certification and promoted responsible management of the world’s forests. Through this collaboration FSC seeks to connect FSC-certified forest managers with new markets, help project managers market FSC benefits and enable carbon markets to drive value to FSC certified forests.  Ecosystem Marketplace has tracked global carbon market transactions and associated benefits “beyond carbon” for more than 16 years.  Transaction attributes that EM tracks include co-benefit standards such as Climate, Community and Biodiversity (CCB) and project assessments of Sustainable Development Goals.

The shared workplan includes publishing a brief discussion paper focusing on non-carbon benefits of forest carbon projects and the overlap with FSC certified forests.  Research will pull from carbon markets data that EM collects, FSC certified projects, public data sets such as international carbon standard registries, and structured interviews with forestry project managers. The work will begin by cross mapping FSC certified forests with carbon market data that EM has compiled for forestry projects, specifically Improved Forestry Management projects, in order to identify the subset of forestry projects on which the analysis will focus.

The first discussion paper will be published pre-COP27 in Egypt in November and accompanied by a webinar presentation.  EM and FSC also hope to collaborate on side events focused on land use and the voluntary carbon market at the Forestry Pavilion at COP27.

If interested, or to learn more  about this collaboration, contact info@ecosystemmarketplace.com or ecosystemservices@fsc.org

Brazil and the carbon markets

This article first appeared on Biofilica

15 June 2022 | A new Federal decree puts Brazil on route to capture an important share of the voluntary carbon market that is expected to grow at least tenfold by 2030¹ and helps to understand the executive branch’s strategy of what may turn out to be a Brazilian ETS².

 

In a pompous event held at the Botanical Garden in Rio de Janeiro and attended by the President, his Ministers of Economy, Environment, Foreign Affairs, Mines and Energy, with the presidents of the Central Bank, Bank of Brazil, Petrobrás, as well as dozens of CEOs and entrepreneurs of companies linked to the energy sectors, agriculture and environmental markets, the Federal Government announced a series of measures to increase Brazilian competitiveness in businesses related to decarbonization and so-called Green Investments. Undoubtedly, the most important was Decree 11,075, which established procedures for sectoral agreements for greenhouse gas (GHG) mitigation, in addition to establishing the National System for Reducing Greenhouse Gas Emissions, entitled SINARE.

 

A 13-year long journey

The legal basis of the decree dates back to 2009, when the National Climate Change Policy (PNMC, in Portuguese) was established by law. It is in the PNMC that the idea of sectoral agreements for GHG mitigation originates, targeting, for example, the energy, agriculture and transport sectors; it also introduced the concept of the Brazilian Market for Emission Reduction, a green and yellow ETS.

Unfortunately, after 13 years of the PNMC, we have not yet established sectoral plans and it was only until recently that we begun to see significant advances in the business environment for the development of voluntary carbon markets in Brazil, with the establishment of the Forest + Carbon Program (2020), and the National Payment Policy for Environmental Services (law 14,119) of 2021.

This pro-market direction is essential for Brazil to capture a share consistent with our competitive advantages, bringing here, via carbon markets, a necessary financing for a decarbonization route, especially in activities related to land use such as within agriculture and forest management.

This decree is only the long-awaited kick-start, as there is still a long regulatory path to address complex technical issues and legal gaps that still need to be clarified, such as the legal nature of the carbon credits, and adopted, such as the Socio-Environmental Safeguards for registration in the SINARE. Some market analysts and lawyers linked to the topic suggest that some of these gaps should be filled in the form of law, currently debated in Congress under law proposal 528/21³. Such complementary initiatives should be followed in parallel with other pricing mechanisms established by law, a fact widely recognized in Article 6 the Paris Agreement.

In any case, it is evident that the political signal of the path chosen by Brazil in relation to the financing of activities related to decarbonization, is one of more markets and less taxes. This approach is also in line with the recently published World Bank carbon pricing report, which shows that worldwide in 2021, the collected total via a carbon market was around US$ 56 billion, while in tax regimes the amount stood at US$ 28 billion. Emphasizing that in the case of markets, this is only the value of primary transactions (purchase of allowances4 + first sale in the voluntary market), that is, it does not include the secondary market that is estimated to be in the magnitude of US$ 754 billion.

 

What does the voluntary market have to do with all this?

The voluntary carbon market serves to increase the climate ambition of various actors, such as companies committed to Net Zero paths, while financing activities that are not yet financially viable, such as forest restoration and conservation. Numerous market analyses and reports5 indicate a growth between 15 and 20 times in the next 10 years. McKinsey estimates a market value of around $50 billion by 2030. Last year alone, more than 110 GHG sequestration and reduction initiatives funded by this market were launched only in  Verra’s Verified Carbon Standard (VCS).

Seeking a slice of this global funding cake is the obligation of any government that is seriously committed to sustainable development in Brazil. In this sense, instituting SINARE, observed by the need to define Social and Environmental Safeguards, represents a major advance and deserves to be celebrated. This mechanism has been a longstanding demand by project developers, including Biofílica. The expectation is that this central and digital registry will serve as a kind of “filter”, allowing only the registration of high integrity, socio-environmentally sound programs and projects, with real climatic benefits. This only strengthens the quality of “Made in Brazil” credits and makes us even more competitive to receive financing via carbon markets. Export.

It is also possible to imagine that within a five-year horizon, credits registered within the SINARE can access demand from regulated companies in Brazil that will need to achieve their sectoral goals. Domestic sale.

 

 

Portuguese version see below:

Decreto do Governo Federal coloca o Brasil na rota de capturar uma importante fatia do mercado voluntário de carbono que deve crescer pelo menos dez vezes até 2030¹ e ajuda a entender a estratégia do executivo do que pode vir a ser um ETS² Brasileiro.

 

Em um evento pomposo realizado no Jardim Botânico do Rio de Janeiro e que contou com a presença do presidente da República, seus ministros da Economia, Meio Ambiente, Relações Exteriores, Minas e Energia, com os presidentes do Banco Central, do Banco do Brasil, da Petrobrás, além de dezenas de CEOs e Empreendedores de empresas ligadas aos setores de energia, agropecuária e mercados ambientais, o Governo Federal anunciou uma série de medidas para aumentar a competitividade brasileira em negócios ligados à Descarbonização e aos chamados Investimentos Verdes. Sem dúvida, o mais importante foi o decreto 11.075 que estabelece procedimentos para acordos setoriais de mitigação de Gases de Efeito Estufa (GEE), além de instituir o Sistema Nacional de Redução de Emissões de Gases de Efeito Estufa, intitulado de SINARE.

 

13 anos de trajetória

A base jurídica do decreto é de 2009, quando foi estabelecida por lei a Política Nacional de Mudança do Clima (PNMC). É na PNMC que surge a ideia dos acordos setoriais para mitigação de GEE, incluindo por exemplo os setores de energia, de agricultura e transporte; além de introduzir o conceito do Mercado Brasileiro de Redução de Emissões, o ETS verde e amarelo.

Infelizmente já passados 13 anos da PNMC ainda não temos estabelecido os planos setoriais e muito recentemente começamos a ver avanços expressivos nas condições de negócios (“business environment”) para o desenvolvimento dos mercados voluntários de carbono no país, com o estabelecimento do Programa Floresta+ Carbono (2020), e da Política Nacional de Pagamento por Serviços Ambientais (lei 14.119) de 2021.

Esse direcionamento pró mercado é essencial para que o Brasil possa capturar uma fatia condizente com nossas vantagens competitivas, trazendo para cá, via mercados de carbono, financiamento mais do que necessário para uma rota de descarbonização, principalmente em atividades ligadas ao uso da terra como agropecuária e florestas.

Esse decreto é apenas o tão esperado pontapé inicial, afinal resta ainda um longo caminho regulatório para endereçar questões técnicas complexas e lacunas jurídicas que ainda precisam ser esclarecidas, como da própria natureza jurídica dos créditos, e adotadas, como por exemplo as Salvaguardas Socioambientais para registro no SINARE. Alguns analistas de mercado e advogados ligados ao tema sugerem que parte dessas lacunas deveriam ser preenchidas em formato de Lei, hoje debatidas no Congresso sob o PL 528/213.Iniciativas complementares que devem seguir em paralelo a outros mecanismos de precificação estabelecidos por Lei, fato amplamente reconhecido no artigo 6 do Acordo de Paris.

De qualquer maneira fica evidente a sinalização política do caminho escolhido pelo país em relação ao financiamento de atividades ligadas à descarbonização, mais mercados e menos impostos. Muito em linha com o recém-publicado relatório do Banco Mundial sobre Precificação de Carbono, que mostra que mundialmente em 2021 o total arrecadado via mercado de carbono foi da ordem de US$ 56 bi, enquanto nos regimes de impostos (tax) o valor ficou em US$ 28 bi. Enfatizando que no caso dos mercados, esse é apenas o valor das transações primárias (compra de allowances4+ primeira venda no Voluntário), ou seja, não inclui o mercado secundário que pode ser na ordem de US$ 754 bi.

 

E o mercado voluntário com isso?

O mercado voluntário de carbono serve para aumentar a ambição climática de diversos atores, como empresas comprometidas com o Net Zero, e ao mesmo tempo financiar atividades ainda sem viabilidade financeira, como restauração e conservação florestal. Inúmeras análises e reportes de mercado5 indicam um crescimento entre 15 à 20 vezes nos próximos 10 anos. A Mckinsey estima um valor de mercado da ordem de US$ 50 bi em 2030. Só no ano passado, foram lançadas mais de 110 iniciativas de sequestro e redução de GEE financiadas por esse mercado somente no padrão Verified Carbon Standard (VCS) do Verra.

Buscar uma fatia desse bolo global de financiamento é obrigação de qualquer governo comprometido seriamente com o desenvolvimento sustentável no Brasil. Nesse sentido, a instituição do SINARE, observada à necessidade da definição de Salvaguardas Socioambientais, é um grande avanço, pleito antigo das empresas desenvolvedoras de projetos como a Biofílica, e merece ser celebrado. A expectativa é que essa central única e digital sirva como uma espécie de “filtro”, permitindo somente o registro de programas e projetos socioambientalmente íntegros, com benefícios climáticos reais. Isso só fortalece os créditos “Made in Brazil” e nos deixa ainda mais competitivos para receber financiamento via mercados de carbono. Exportação.

É também possível imaginar que em um horizonte de cinco anos os créditos registrados dentro do Sinare possam acessar demanda de empresas reguladas no Brasil que precisarão atingir suas metas setoriais. Venda doméstica.

RE100 proposes changes to its Technical Criteria: European market boundary narrowed

This article first appeared on Greenfact.

09 June 2022 | The RE100 launched a public consultation on three proposed changes to its technical criteria following town hall meetings it held with members in February 2022.

The consultation proposes the following three key changes:

  1. Make AIB membership the market boundary for Europe
  2. Accept physical cross-market procurement when certain conditions are met
  3. Introducing a 15-year limit on commissioning dates which RE100 members may claim purchased (not-self generated) renewable electricity from.

A glimpse into the RE100

RE100 is a global initiative led by The Climate Group in partnership with the CDP to drive change towards zero-carbon grids at scale. The initiative consists of large and influential firms aiming for 100% renewable electricity. According to the initiative for a company to be considered 100% renewable it “must procure or self-produce 100% of its electricity throughout its entire operations from renewable sources.”

On the path to achieving 100% renewable electricity consumption RE100 companies may use the following two methods of procurement:

  • Self-production and use of renewable electricity. These self-owned production devices can be grid-connected either onsite or offsite or they can be entirely off the grid.
  • Procured renewable electricity sourced from producers and suppliers in the market. This includes Power Purchase Agreements, retail purchases from utilities and the procurement of unbundled Energy Attribute Certificates (EACs).

Proposed changes to the RE100 Technical criteria

The RE100’s technical criteria outline the renewable energy sourcing options available to companies that participate in the RE100 campaign while defining what counts as renewable electricity. The criteria are set by the RE100 Technical Advisory Group in consultation with member corporations and with the approval of the RE100 Project Board.

Considering that the renewable energy market is an everchanging landscape revisions are made to the technical criteria every two years in March. The next planned update will be published in March 2023.

Making AIB membership the market boundary for Europe

The RE100 requires its members to procure renewable electricity from the same markets in which they operate and most markets are defined by national geographic boundaries. However, Europe and North America have been regarded as exceptions due to having single markets for electricity trading.

Regarding Europe specifically, the CDP’s guidance on market boundaries is more restrictive and differs from the RE100’s as the CDP considers AIB member countries as the defining market boundary for Europe.

AIB member countries

As such to prevent this conflicting guidance between the two initiatives considering that some RE100 members also report to the CDP, the CDP’s market boundary provisions will be adopted. This means that new contracts that do not observe this market boundary will not be accepted by the RE100 however any contracts before 31 December 2021 would continue to be accepted.

The purpose of this proposal is to have standardised harmony between the CDP’s and RE100’s reporting guidance and to ensure that EACs in the European market boundary are EECS compliant.

Market impact

This means that from 31 December 2021 onwards electricity and the associated EACs must be sourced from within the AIB market which will restrict the available markets for members considering that not all European countries are a part of the AIB and to this, the RE100 market boundary before was far larger.

Once this goes into effect the following countries will no longer be part of the RE100’s defined single market for electricity trading in Europe:

Countries no longer part of RE100's single market for Europe
Countries no longer part of RE100’s single market for Europe

The impact of this change will especially be more significant for RE100 members who do not report to the CDP and as such have only been observing the RE100’s larger European market boundary.

According to the RE100 members who operate in non-AIB countries can only use in-country renewable electricity to decarbonize consumption. Based on reporting from 159 members in 2021, 459 GWh of procurement of renewable electricity from 22 RE100 members in 28 European countries will no longer meet the RE100’s technical criteria. However, it is of note that most of these members already report to the CDP and as such already privy to the stricter provisions.

Regarding the UK, the RE100 and CDP have taken note of the legal situation of procurement between the UK and mainland Europe. In the short-to-medium term, it is expected that the UK will cease accepting EU renewable electricity while a mutual recognition is negotiated. The CDP and RE100 have mentioned in their proposal that should the UK become an AIB member, then it would be recognized as part of the market boundary for Europe in their respective guidelines. It is assumed that this will also be the case for any other European country either in the list above or new to come that join the AIB.

For RE100 members that already report to the CDP, this change will not have a major impact however for non CDP members the impact will be significant and a transition and grandfathering plan for the 2023 annual reporting cycle will possibly take place.

This could mean a bullish signal for the market as current and new members’ demand for renewable electricity and Guarantees of Origin within the AIB will increase which would provide upward support to GoO prices. Additionally, for RE100 members that have operations within non-AIB countries, the demand for local renewable energy and local EACs will significantly increase as according to the new rules they will only be allowed to source in-country resources. In certain countries listed like the UKwe expect both the amount of REGO issuances to significantly increase, as the demand will be largely higher but we expect demand to exceed supply and as such the price for UK REGOs to increase.

It is also of note that AIB membership is expected to increase especially with the Energy Community Secretariat being in the midst of launching a project to create an electronic system for GOs in the following 8 Eastern European countries namely:

•Albania,

•Bosnia and Herzegovina,

•Georgia,

•Kosovo,

•North Macedonia,

•Moldova,

•Montenegro

•Ukraine

Therefore the more countries join the AIB the wider the market boundary for procurement by RE100 members.

Accepting physical cross-market procurement when certain conditions are met

The RE100 proposes to amend its note on market boundaries to accept claims of use of renewable electricity sourced across market boundaries when all of the following apply:

  • The Member has entered into a PPA with a producer in a different market from their consumption or into a green electricity product with a utility that has such a PPA.
  • The cross-market electricity is physically transmitted from the renewable electricity generator connected to the cross-market transmission infrastructure. (there has to be a physical interconnection between the countries)
  • The delivery and ownership of the EACs from the generator to the consumer are specified in the PPA. Ideally, credible EAC systems should be used and recognized in both markets.
  • The residual mix is calculated in both markets.

Additionally, where single markets exist as defined by the RE100 (e.g Europe and North America), all cross market procurement between countries within those single market boundaries will be accepted. In the case of Europe, this means that supply arrangements for renewable electricity between AIB member states will be accepted but beyond that, the abovementioned points need to be adhered to.

If this proposal is realised this could have a significant impact on the possible volumes of renewable electricity that RE100 members could credibly source which would potentially decrease especially with the physical interconnector requirements.

ENTSO-E Transmission System Map showing cross border interconnection in Europe only
ENTSO-E Transmission System Map showing cross border interconnection in Europe only

That said the European Union has been adamant about promoting interconnections with its neighbours with the aim of enhancing the security of supply. This is reflected in the Commission’s recently published REPowerEU plan which plans to “implement many long-pending projects, with a particular focus on cross-border connections to build an integrated energy market that secures supply in a spirit of solidarity.

As per the REPowerEU plan, an additional EUR 29 billion of investments will be required to power the grid by 2030 to make it fit for increased use and production of electricity. All relevant projects to be funded are included in the fifth PCI list which includes 98 projects in total of which 67 are related to electricity transmission and storage projects. On the priority list is two offshore grid interconnections namely:

  • Celtic Interconnector (between France and Ireland)
  • North Sea Wind Power Hub (between Denmark, Germany and the Netherlands)

The Commission also stated that it plans on increasing the interconnection capacity between the Iberian Peninsula and France while it has also taken actions in synchronizing the Baltic State’s electricity networks with the continental European network. As more physical interconnections are established between the EU and third neighbouring countries the possible renewable energy volumes that RE100 members could source from becomes wider.

Introducing a 15-year limit on commissioning dates

The RE100 proposes to introduce a 15-year commissioning date limit on the facilities members may claim renewable electricity from. This limit will only apply to purchased electricity and not self-generation.

The reason behind this proposal is that the RE100 would like its technical criteria to further support the procurement of renewable electricity which adds new RES capacities to the grids. According to the proposal “while older renewable generation is still an important resource for the grid, procuring from it does not directly change the grid mix.”

Market impact

According to reports from 159 members in 2021, 15 Members procuring from 31 countries purchased 523 GWh of renewable electricity from facilities commissioned more than 15 years ago which means that these companies would need to change their procurement. Meanwhile, around 19.2 TWh of renewable electricity was procured from facilities commissioned in the last 15 years.

It is of note that the commissioning dates of around 48.3 TWh of purchased renewable electricity were not reported by members thus hindering a more robust impact assessment. According to the RE100, data on commissioning dates are being sought from EAC registries globally for the initiative to better develop its impact assessment.

However one can assume that this would shift the demand profile of members within the initiative to be more focused on procuring renewable energy from younger plants such as wind and solar PV plants as opposed to older hydro technologies. This demand shift could further trickle down into the EAC markets. Also, this criterion for generation from “younger” power plants is one that is already adopted by energy labels such as Naturmade as such this change could result in increased demand for such energy labels. Historically there has been a slightly wider spread between EACs from younger plants versus hydro based certificates however more recently this spread between technologies has become much narrower this could possibly change as more RE100 members change their procurement methods.

Moving forward

Overall the proposed changes by the RE100 while more restrictive are aimed to have the initiative’s guidelines fall in line with the CDP’s and also provide guidelines that allow its members to credibly source renewable energy with a demand that fosters new renewable capacities on the grid.

Membership to the RE100 has been growing year on year with over 23 corporations joining in 2022 thus far and a current total of 372 members thus far. Considering that in 2021, the aggregated electricity consumption of 315 reporting members was over 340TWh, higher than the United Kingdom the sheer demand from these members has and will continue to have a large impact on renewable energy and EACs demand.

Ambitious New Plan to Scale Up REDD+ Announced

COP26 can be characterized by pledges, protests, and promises. One of the most significant and notable pledges was “The Glasgow Leaders’s Declaration on Forests and Land Use”. The pledge galvanized myriad actors in the carbon space, setting in motion further plans to tackle the climate crisis head-on via nature-based solutions.

Everland , a specialized conservation marketing company has launched The Forest Plan this past Thursday as a response to The Glasgow Leaders’ Declaration on Forests and Land Use at COP26. This ambitious plan  aims to scale up Everland’s portfolio of community-based Reduced Emissions from Deforestation and forest Degradation (REDD+) projects by supporting the development of up to 75 tropical forest conservation projects in critical hot spots. REDD+ projects and their positive outcomes can be found all over the world, including protecting and restoring flora and fauna within designated project areas, as well as supporting livelihoods for those that directly depend on the sustainable management of these tropical forests.

Everland has a proven track record of producing high quality REDD+ credits by working with and channeling funding to Indigenous Peoples and Local Communities (IPLCs). The Forest Plan aims to dramatically scale up this effort, helping project developers, communities, and governments working on the ground generate up to 90 million tons of Verified Emission Reductions (VERs) annually and over 800 million tons in total by 2030. Under The Forest Plan, projects will also be developed by Wildlife Works, the Wildlife Conservation Society, Wildlife Alliance, and other Everland partners.

The plan is expected to generate over $2 billion in financial flows over the next 10 years that’ll be streamlined towards community-based forest conservation projects. Everland’s Forest Plan will rely on ever evolving science-based approaches as well as addressing the economic root cause of forest loss and degradation.

 

Disclaimer: Everland is an EM Strategic Supporter and is also a partner with Forest Trends’ Communities and Territorial Governance Initiative.

Blog: World Bank 2022 Carbon Pricing Report Launch
Global carbon pricing generating record revenues but much potential remains untapped

24 May 2022  |  The climate crisis continues to escalate amid a prolonged pandemic, increasing economic instability and geopolitical tensions. Commitments at COP26 keep hope alive that avoiding the worst effects of climate change is within our reach, but the peril remains stark.  The latest work from the Intergovernmental Panel on Climate Change makes plain that we must arrest rising emissions now to ward off climate danger. Meeting this challenge in uncertain times calls for ambitious, just, and comprehensive action by policymakers. In this regard, carbon pricing, within an integrated policy mix, is one of the most powerful tools for guiding economies toward low emissions paths. To maximize the benefits, carbon price signals must be sustained, strengthened, and extended to a greater portion of global emissions, three-quarters of which are currently untouched by carbon pricing instruments. However, recent economic instability, volatile energy markets and rising energy prices exacerbate the political challenges for policymakers.

The World Bank’s annual report on the State and Trends of Carbon Pricing continues to provide a trusted global snapshot of carbon pricing developments year to year. The past year has seen some positive signs, particularly in relation to higher carbon prices, increased revenues, progress towards resolving cross-border issues, and the adoption of new rules for international carbon markets (under Article 6 of the Paris Agreement). However, as with previous years, progress has been far from adequate. As of April 1, 2022, only four new carbon pricing instruments had been implemented in the past year and despite record-high prices in some jurisdictions, the price in most jurisdictions remains well below the levels required to deliver on the Paris Agreement temperature goals.

In 2021, higher carbon prices, revenue from new instruments, and increased auctioning in emissions trading systems have resulted in a record USD 84 billion of global carbon pricing revenue, around 60% higher than in 2020.  Such an impressive increase highlights carbon pricing’s burgeoning potential to reshape incentives and investment toward deep decarbonization. Further, it illustrates carbon pricing’s potential role as a broader fiscal tool to contribute towards broader policy objectives, such as to restore depleted public finances, aid pandemic recovery, or support vulnerable sectors and communities to adapt to climate impacts and achieve just transitions.

“In 2021, higher carbon prices, revenue from new instruments, and increased auctioning in emissions trading systems have resulted in a record USD 84 billion of global carbon pricing revenue, around 60% higher than in 2020.”

During this year, cross-border approaches for carbon pricing and international cooperation have made significant strides forward.  The European Union moved closer to adopting its Carbon Border Adjustment Mechanism, while Canada and other jurisdictions reaffirmed their commitments to investigate border carbon adjustments and bring down hitherto daunting technical and political barriers to such reforms. The COP26 agreements on new rules for international carbon markets help pave the way for more cross-country collaborations and trade.

Encouragingly, more countries continue to explore options to introduce a carbon price, including in low- and middle-income countries. The World Bank is gearing up to meet this increased demand from client countries for technical support on carbon pricing – and is helping countries mainstream it into wider fiscal policy and long term decarbonization strategies.  This includes developing advisory services, analytics, innovation and hosting initiatives such as the Partnership for Market Implementation (PMI). The PMI will provide technical assistance to at least 30 countries in developing and implementing domestic carbon pricing and operationalizing Article 6 of the Paris Agreement.

The World Bank Group’s Climate Change Action Plan (2021-25) committed to increase the World Bank’s climate finance target, align financing flows with the goals of the Paris Agreement, and achieve results that integrate climate and development. Through this Action Plan, the World Bank Group is well positioned to leverage its convening power, knowledge and research, and country program support to help countries make informed climate decisions, including on carbon pricing.

This piece appears as a World Bank Blog and the foreword of the 2022 annual State and Trends of Carbon Pricing report. The full report is available for download here.

CITES takes unprecedented steps to stop the illegal African rosewood trade

On March 11th, the 74th Standing Committee meeting of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) met to discuss the continuing illegal trade of Pterocarpus erinaceus, also known as kosso or African rosewood. Today, the CITES Secretariat took an unprecedented step by notifying all range States (countries where the species is endemic) that they have 30 days to either:

  1. Verify that the species is harvested legally (via a Legal Acquisition Finding [LAF]) and without further detriment to the survival of the species (via a Non-Detriment Finding [NDF])
  2. Submit to a voluntary zero-export quota where no exports of the species will be allowed, or
  3. Face formal trade suspension.[1]

This is a remarkable move.

The proposal, put forth by all range States who attended the meeting and supported by the US and the EU, initiates Article XIII, also known as CITES’ official compliance framework. Invoking Article XIII indicates a serious concern for “systemic or structural problems with the implementation or enforcement of the Convention.”[2] In other words, it is an acknowledgment that past measures to protect P. erinaceus have simply not worked, and that CITES Parties (countries that are signatory to CITES) who are responsible for the measures to verify the legality and sustainability of trade, have not been able to eradicate illegal trade alone. It is also in keeping with 2019 CITES guidance on the verification of legal acquisition of CITES specimens. While producing a LAF to verifying legal acquisition has always been a requirement for issuance of a CITES export permit, the 2019 guidance acknowledges states that rule of law cannot simply be assumed, and that leaving Parties to their own devices (absent unifying guidance) was undermining the ability of CITES to control illegal trade.[3]

African rosewood was listed on Appendix II of CITES in 2016. To date, however, no range State has been able to submit an acceptable LAF or NDF, and illegal trade remains pervasive. Piecemeal measures, such as trainings and risk assessments recommended by the CITES Secretariat, have not been implemented at the scale required to truly make a difference.

Background: Why African rosewood?

The term “rosewood” is used to designate several hundred species of tropical timber found across West and Central Africa, Southeast Asia, and Latin America. As anchor species in old-growth forests, rosewood can deliver critical ecosystem services, such as supporting biodiversity and reducing flooding and water stress. Healthy ecosystems can also support sustainable socio-economic development – when harvested sustainably, rosewood can boost local livelihoods; it is also traditionally used for medicine.

A large body of evidence has demonstrated illegalities in rosewood supply chains, including harvesting in contravention of national laws, smuggling, transshipment, and documented links to corruption and conflict. Rosewood has become the most trafficked group of endangered species, and African rosewood is by far the most trafficked rosewood. Corruption, poor governance, and conflict over natural resources undermines the social fabric of national governance and sustainable development, and rosewood species are often targeted by traders taking advantage of an environment in which laws are non-existent or poorly enforced. Import data reveal that rosewood follows a “boom and bust” cycle, in which traders can nimbly pivot from one country to another, often capitalizing on weak governance, political transitions, or the suspension of national legislation, such as a log export ban. In several range States, the revenues generated from the rampant extraction of rosewood fuels ongoing inter- and intrastate conflict, including armed conflict.

China is the main – but not the only – rosewood market, led in part by a resurgence in demand for Ming dynasty-era classical furniture and décor and to financial speculation that, as political ecologist Annah Zhu argues, functions as a “cultural fix” or an outlet for surplus wealth.[4] Twenty-nine species, including P. erinaceus, are officially designated as hongmu (红木) under China’s National Hongmu Standard (2017). Given its cultural importance, China Customs maintains separate HS codes for rosewood logs, sawnwood, and furniture.

2014 marked the peak of the rosewood “boom,” in which China imported over $2 billion in hongmu species. Trade fell precipitously in 2015 before peaking briefly again in 2017. By 2020, imports had dropped to one-fifth of their 2014 levels, and the proportion of rosewood species in China’s total log import mix has dropped accordingly. Traditionally, most of China’s rosewood imports have come from Southeast Asia. From 2010 to 2014, however, China’s rosewood imports from Africa soared 700%, as Asian rosewood species were increasingly logged out and traders found willing sellers, a less-expensive species (P. erinaceus), and governments that either lacked capacity to clamp down on illegal logging and trade, or in some cases, actively supported it.  In 2020, over 83% of China’s rosewood imports were from Africa.

Figure 1: China’s imports of hongmu logs and sawnwood, by source region and volume, 2011-2020

Source: General Administration of Customs, P.R. China, compiled and analyzed by Forest Trends

Boom and bust: Tracking the fast-moving kosso trade between West Africa and China

African rosewood is now vital to the timber trade between West Africa and China. Seventy-seven percent of all hardwood logs imported from West Africa into China are now reported as hongmu, soaring from 34% in 2011, even as absolute trade in hongmu has dropped.

Figure 2: Proportion of China’s log imports from West Africa classified as rosewood, 2011-2020

Source: General Administration of Customs, P.R. China, compiled and analyzed by Forest Trends

In January 2017, CITES listings regulating trade in many rosewood species took effect, including a genus-wide listing for Dalbergia and a listing for P. erinaceus. While overall Chinese imports have declined, China’s rosewood imports in 2017 actually rose compared to the previous year – demonstrating the limited effectiveness of the CITES listing. It was only in November 2018, when CITES issued a trade suspension of P. erinaceus from Nigeria,[5] that Chinese imports began to decline. Nigeria was then the largest supplier of rosewood globally and accounted for over 60% of China’s rosewood imports. An Environmental Investigation Agency (EIA) report revealed that the then-Environment Minister, who signed close to 3,000 CITES export permits, allowed traffickers to export an estimated $300 million worth of logs.[6] The trade suspension had immediate impact: China’s imports of Nigerian rosewood the next year fell by 30-fold, causing overall rosewood imports to drop more than 50%.

Figure 3: China’s monthly imports of hongmu logs and sawnwood from West Africa, by volume, January 2017 – December 2021

Source: General Administration of Customs, P.R. China, compiled and analyzed by Forest Trends

Imports from other supplier countries, such as The Gambia and Ghana, are down as well, due to a combination of factors such as enforcement of national export bans, difficulty in getting CITES permits, and the economic turmoil precipitated by COVID-19. And yet, the market has survived by simply shifting elsewhere, with Sierra Leone and Mali emerging as China’s top suppliers of P. erinaceus. In 2021, almost two-thirds of China’s P. erinaceus imports by volume, and three quarters by value, were from these two countries. Trade is booming in Sierra Leone, which supplied 36% of all reported rosewood imports into China in 2021 but is barely visible (see Figure 3) until late 2017. A February 2022 investigation claims that the country’s Minister of Agriculture, Forestry, and Food Security is “personally benefitting” from the kosso trade, which has catalyzed “catastrophic food insecurity and…environmental and ecological devastation.”[7]

China does not currently require traceability of imported wood products through their supply chains, nor have they instituted an import regulation aimed at excluding illegally sourced timber from the market. This could change, as China’s 2019 Forest Law contains a legal basis for prohibiting illegal logging, and implementing regulations are expected to clarify whether and how the Law applies to imports. Until then, Customs officials must rely on CITES permits, which are seen as the exporter’s responsibility – once the paper is in-hand, it is accepted. But permits are often fraudulent.

Evidence from Vietnam

Vietnam has historically been a key market for rosewood, but imports have dropped precipitously between 2015 and 2020, then stopped altogether in 2021. Vietnam is the second-largest importer of African timber in the world beyond China, with imported P. erinaceus largely processed into rosewood furniture and exported onward to China. Unlike China, Vietnam has an import regulation in place that prohibits the imports of illegal timber: in 2019, Vietnam signed a bilateral trade agreement, the Forest Law, Governance, Enforcement and Trade Voluntary Partnership Agreement (FLEGT-VPA) with the EU, which contained a commitment to ensure that wood products are legally sourced. In 2020, a Decree was issued on the Vietnamese Timber Legality Assurance System (VNTLAS), stipulating that for countries and species deemed “high-risk,” importers must provide additional documentation demonstrating legal compliance and undertake due diligence.[8] While importers claim the new requirements are “confusing” and customs data indicate few signs in reduction of overall high-risk timber imports,[9] as of 2021, Vietnam no longer imports P. erinaceus. Other factors could be the decreasing demand within China, or that Chinese traders are sourcing directly from range States rather than through Vietnam.

Figure 4: Vietnam’s imports of P. erinaceus, by volume and value, 2015-2020. Left: Nigeria; Right: all other supplier countries

Source: Vietnam’s Customs Statistics, compiled by Vietnamese timber associations and Forest Trends

Conclusions

Given the evidence of continued trade in P. erinaceus, the CITES Secretariat’s notification to range States is a big step – whether the outcome be robust LAF and NDF, zero-export quotas, or formal trade suspension. No longer would importers simply accept a CITES permit as evidence of legal and sustainable sourcing. Because the notification covers all countries in which P. erinaceus is grown, we are less likely to see “leakage” in which restrictions in one country lead to a spike in trade from another, as has often been the case.

However, there remains risk that trade will simply continue unreported via smuggling or misdeclaration of logs as other, non-protected species. Parties to CITES should also be aware of other African tropical hardwood species that are already being identified as substitutes for kosso in Chinese markets, many of which are also being heavily exploited (Table 1). A genus listing for Pterocarpus will be submitted to the 19th CITES Conference of Parties (CoP) in November 2022, and there is some momentum for a Guibourtia genus listing (unlike listings of single species, genus listings are thought to be more comprehensive). But without widespread protection for all tropical hardwoods, there is a risk that lookalike species will be targeted. Traders claim that South American species may already also be substituting for African rosewood and China’s imports from the region are surging.

Ultimately, effective legislation by all nations, particularly the Chinese government, is needed to exclude all illegally sourced timber from international trade. China could accomplish this by enforcing the 2019 Forest Law or other measures, which can complement CITES listings to ensure that future trade in all timber is legal, sustainable, and beneficial to local livelihoods in places where timber is grown.

Table 1: Potential replacement species for P. erinaceus

Note: based on best available public data. Forest Trends assumes responsibility for any errors.

For more information on the legality risks associated with rosewood supply chains, please visit https://www.forest-trends.org/fptf-idat-home/.

[1] CITES. 2022. “Notification to the Parties No. 2022/021: Expedited application of Article XII for West African rosewood Pterocarpus erinaceus for all range states.” Accessed March 28, 2022. http://cites.org/eng/node/130795

[2] CITES. 2022. “Convention on International Trade in Endangered Species of Wild Fauna and Flora, Article XIII”. Convention on International Trade in Endangered Species of Wild Fauna and Flora. Accessed March 16, 2022. https://cites.org/eng/disc/text.php#XIII

[3] Forest Trends and CIEL. 2022. Legal Acquisition Findings: A Handbook by Forest Trends and Center for International Environmental Law (CIEL). Washington, DC: Forest Trends. Accessed March 16, 2022. https://www.forest-trends.org/publications/legal-acquisition-findings-a-handbook/

[4] Zhu, Annah Lake. 2018. “China’s Rosewood Boom: A Cultural Fix to Capital Overaccumulation”. Annals of the American Association of Geographers 110 (1): 277-296. DOI: 10.1080/24694452.2019.1613955

[5] CITES. 2018. “Notification to the Parties: Application of Article XIII in Nigeria”. Convention on International Trade in Endangered Species of Wild Fauna and Flora. Accessed March 16, 2022. https://cites.org/sites/default/files/notif/E-Notif-2018-084.pdf

[6] EIA. 2017. The Rosewood Racket: China’s Billion Dollar Illegal Timber Trade and the Devastation of Nigeria’s Forests. Washington, DC: Environmental Investigation Agency. Accessed March 16, 2022. https://eia-global.org/reports/the-rosewood-racket

[7] Thomas, Abdul Rashid. 2022. “Chainsaw Massacre: How Sierra Leone’s Forestry Minister benefits from Illegal Logging”. The Sierra Leone Telegraph, February 27. Accessed March 16, 2022. https://www.thesierraleonetelegraph.com/chainsaw-massacre-how-sierra-leones-forestry-minister-benefits-from-illegal-logging/

[8] Forest Trends. 2021. Vietnamese Imports of High-Risk Timber: Current Status and Control Mechanisms. Washington, DC: Forest Trends. Accessed March 16, 2022. https://www.forest-trends.org/wp-content/uploads/2021/07/Vietnamese-imports-of-high-risk-timber-BRIEF.pdf

[9] Cowan, Carolyn. 2022. “Vietnam’s timber legality program not making a dent in risky wood imports”. Mongabay, February 2. Accessed March 16, 2022. https://news.mongabay.com/2022/02/vietnams-timber-legality-program-not-making-a-dent-in-risky-wood-imports/

(This blog first appeared on Forest Trends’ blog: Viewpoints on 28 March 2022)

Blog
REDD+ evolves with Verra’s changes to key methodologies

This blog first appeared on Carbon Pulse.

REDD+ refers to reducing emissions from deforestation and forest degradation and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries.

The changes would affect Avoiding Unplanned Deforestation and Degradation (AUDD) projects by updating and standardising methods for measuring project success (baseline setting based on jurisdictional data and monitoring) and addressing deforestation that migrates elsewhere (leakage). They draw on years of public consultation and incorporate the majority views of scientific experts from a decade of on-the-ground experience.

In proposing the updates, Verra upholds the global vision that guided the creation of REDD+ more than 15 years ago: a way for resource-constrained governments to finance forest protection. At the time, few governments could accurately estimate – let alone counter – deforestation within their jurisdictions, so standalone projects emerged to protect the most vulnerable forest areas as government programs materialized.

The plan was – and remains – to “nest” standalone projects into government programmes. The Paris Agreement helps integrate forests into government climate strategies, or Nationally Determined Contributions (NDCs). Tools for developing these projects have changed dramatically, thanks to advances in remote sensing and data collection, and they enable the creation of more straightforward, standardised approaches that align with how jurisdictional initiatives can evolve under the Paris Agreement.

Under current rules, project proponents generate baselines through a lengthy process that requires complex modelling of data gathered in “reference areas” that correlate with project areas. Independent validation/verification bodies (VVBs) then audit these baselines before putting them out for public consultation, and these are updated every six years.

Under proposed rules, Verra or a designated activity data provider (ADP) will develop jurisdictional-level activity data baselines, and that data will determine project baselines.  Instead of complex modeling, the new rules use Verra’s standardised benchmark risk mapping tool to identify the most vulnerable forest areas within a jurisdiction in a baseline period.

Initially created to nest projects within jurisdictional programs, the tool uses fewer indicators than traditional modeling does, but it emphasises those that have proven most consistently reliable in the short term, such as proximity to recent deforestation. Verra will then use its risk allocation tool to distribute the jurisdictional deforestation baseline across project areas. This will be used by project proponents – together with project area-specific emissions factors – to establish project baselines. Jurisdictional baselines will then be reassessed every six years, just as individual project baselines are today.

The new approach is consistent with changes that drew broad support in previous public consultations, and we will be unpacking key elements of it in the coming weeks.

This is the first in a series of technical briefings meant to support the public consultation, and the next installment will look at the difference between a forest emissions reference level (FREL) and jurisdictional activity data created under Verra. Further information on Verra’s changes to REDD+ methodologies can be found by viewing the two webinars held in late March.

Scaling up nature-based solutions in the Yaeda Valley

21 April 2022 | Following 12 months of work to expand the award-winning Yaeda Valley REDD project in northern Tanzania, the new project and its activities were validated in March by Plan Vivo, and it is now known as the Yaeda–Eyasi Landscape Project.

Protecting over 100,000Ha of wildlife-rich dryland forest, the project is now Plan Vivo’s largest active forest protection project and supplies high-quality carbon credits to the rapidly expanding voluntary carbon market while delivering livelihood and biodiversity benefits to 61,000 indigenous people.

The project was initiated in 2011 by Carbon Tanzania in partnership with three Hadza hunter-gatherer communities. Over the years it has grown incrementally to protect 32,000 ha of Hadza ancestral forests and in 2019 won the UN Equator Prize. Witnessing the success of this pilot project, nine surrounding Datooga pastoralist communities joined forces with the Hadza and Carbon Tanzania to develop the Yaeda–Eyasi Landscape project resulting in the protection of 110,500 ha of dryland forest legally owned by the Hadza and Datooga people.

“We are delighted to have been able to work with local communities to build a climate solution that secures their land-rights and provides access to carbon finance. Our project development model has shown that when indigenous people have reliable, secure rights over their natural resources and receive appropriate compensation for their efforts to protect and manage them, powerful climate action results are possible.” – Jo Anderson, Co-Founder and Director of Carbon Tanzania, said:

The Hadza and Datooga communities value their land and natural resources in different ways but work together to defend their forests and prevent 171,100 trees from being cut down every year resulting in 177,284 tonnes of avoided emissions annually. These emissions are quantified and certified as carbon credits and sold on the voluntary carbon market. Carbon Tanzania has partnered with myclimate to part-fund the project expansion through pre-payments, and it will be the primary buyer for the credits going forward.

The Hadza and Datooga communities are now able to directly access international climate finance through the voluntary carbon market with the assistance of Carbon Tanzania. Now, instead of bearing the cost of conservation, the Hadza and Datooga are benefiting from a commitment to manage and conserve it and are empowered to determine their own developmental needs.

The Yaeda–Eyasi Landscape project now extends around Lake Eyasi and connects the world-famous Ngorongoro Conservation Area, a UNESCO World Heritage site, to the Yaeda Valley. This habitat connectivity allows for the movement of wildlife, which results in enhanced outcomes for the conservation of the wider landscape and contributes to global efforts to protect biodiversity.

The scaling up of this nature-based solution demonstrates that the voluntary carbon market is an effective way to deliver climate finance to the frontline and indigenous communities who are conserving biodiversity, strengthening their land rights, and protecting traditional lifestyles, while improving their livelihoods.

Press Release – IPCC Report on Climate Change:
It’s not looking good. We have the evidence. We have the tools. Climate action is needed now.

GENEVA, Apr 4 – In 2010-2019 average annual global greenhouse gas emissions were at their highest levels in human history, but the rate of growth has slowed. Without immediate and deep emissions reductions across all sectors, limiting global warming to 1.5°C is beyond reach. However, there is increasing evidence of climate action, said scientists in the latest Intergovernmental Panel on Climate Change (IPCC) report released today. [original IPCC press release available here]

Since 2010, there have been sustained decreases of up to 85% in the costs of solar and wind energy, and batteries. An increasing range of policies and laws have enhanced energy efficiency, reduced rates of deforestation and accelerated the deployment of renewable energy.

“We are at a crossroads. The decisions we make now can secure a liveable future. We have the tools and know-how required to limit warming,” said IPCC Chair Hoesung Lee.  “I am encouraged by climate action being taken in many countries. There are policies, regulations and market instruments that are proving effective.  If these are scaled up and applied more widely and equitably, they can support deep emissions reductions and stimulate innovation.”

The Summary for Policymakers of the IPCC Working Group III report, Climate Change 2022: Mitigation of climate change was approved on April 4 2022by 195 member governments of the IPCC, through a virtual approval session that started on March 21. It is the third instalment of the IPCC’s Sixth Assessment Report (AR6), which will be completed this year.

We have options in all sectors to at least halve emissions by 2030

Limiting global warming will require major transitions in the energy sector. This will involve a substantial reduction in fossil fuel use, widespread electrification, improved energy efficiency, and use of alternative fuels (such as hydrogen).

“Having the right policies, infrastructure and technology in place to enable changes to our lifestyles and behaviour can result in a 40-70% reduction in greenhouse gas emissions by 2050. This offers significant untapped potential,” said IPCC Working Group III Co-Chair Priyadarshi Shukla. “The evidence also shows that these lifestyle changes can improve our health and wellbeing.”

Cities and other urban areas also offer significant opportunities for emissions reductions.  These can be achieved through lower energy consumption (such as by creating compact, walkable cities), electrification of transport in combination with low-emission energy sources, and enhanced carbon uptake and storage using nature. There are options for established, rapidly growing and new cities.

“We see examples of zero energy or zero-carbon buildings in almost all climates,” said IPCC Working Group III Co-Chair Jim Skea. “Action in this decade is critical to capture the mitigation potential of buildings.”

Reducing emissions in industry will involve using materials more efficiently, reusing and recycling products and minimising waste. For basic materials, including steel, building materials and chemicals, low- to zero-greenhouse gas production processes are at their pilot to near-commercial stage.

This sector accounts for about a quarter of global emissions. Achieving net zero will be challenging and will require new production processes, low and zero emissions electricity, hydrogen, and, where necessary, carbon capture and storage.

Agriculture, forestry, and other land use can provide large-scale emissions reductions and also remove and store carbon dioxide at scale. However, land cannot compensate for delayed emissions reductions in other sectors.  Response options can benefit biodiversity, help us adapt to climate change, and secure livelihoods, food and water, and wood supplies.

The next few years are critical

In the scenarios we assessed, limiting warming to around 1.5°C (2.7°F) requires global greenhouse gas emissions to peak before 2025 at the latest, and be reduced by 43% by 2030; at the same time, methane would also need to be reduced by about a third. Even if we do this, it is almost inevitable that we will temporarily exceed this temperature threshold but could return to below it by the end of the century.

“It’s now or never, if we want to limit global warming to 1.5°C (2.7°F),” said Skea. “Without immediate and deep emissions reductions across all sectors, it will be impossible.”

The global temperature will stabilise when carbon dioxide emissions reach net zero. For 1.5°C (2.7°F), this means achieving net zero carbon dioxide emissions globally in the early 2050s; for 2°C (3.6°F), it is in the early 2070s.

This assessment shows that limiting warming to around 2°C (3.6°F) still requires global greenhouse gas emissions to peak before 2025 at the latest, and be reduced by a quarter by 2030.

Closing investment gaps

The report looks beyond technologies and demonstrates that while financial flows are a factor of three to six times lower than levels needed by 2030 to limit warming to below 2°C (3.6°F), there is sufficient global capital and liquidity to close investment gaps. However, it relies on clear signalling from governments and the international community, including a stronger alignment of public sector finance and policy.

“Without taking into account the economic benefits of reduced adaptation costs or avoided climate impacts, global Gross Domestic Product (GDP) would be just a few percentage points lower in 2050 if we take the actions necessary to limit warming to 2°C (3.6°F) or below, compared to maintaining current policies,” said Shukla.

Achieving the Sustainable Development Goals

Accelerated and equitable climate action in mitigating and adapting to climate change impacts is critical to sustainable development.  Some response options can absorb and store carbon and, at the same time, help communities limit the impacts associated with climate change. For example, in cities, networks of parks and open spaces, wetlands and urban agriculture can reduce flood risk and reduce heat-island effects.

Mitigation in industry can reduce environmental impacts and increase employment and business opportunities. Electrification with renewables and shifts in public transport can enhance health, employment, and equity.

“Climate change is the result of more than a century of unsustainable energy and land use, lifestyles and patterns of consumption and production,” said Skea. “This report shows how taking action now can move us towards a fairer, more sustainable world.”

For more information, please contact:

IPCC Press Office, Email: ipcc-media@wmo.int

IPCC Working Group III:
Sigourney Luz: s.luz@ipcc-wg3.ac.uk

Blog:
Talking Carbon Markets with US Climate Envoy, John Kerry

1 April 2022 | I was delighted to join a roundtable with other climate tech innovators at Salesforce Tower in San Francisco a few weeks ago. We came together with John Kerry to discuss how innovation and technology are delivering climate solutions, and explore the role carbon markets can play in the transition to net zero.

There is incredible value in policy coming together with tech innovators to fight the climate crisis. Neither can create change in silo and both rely equally as much on each other in order to challenge the status quo.

What was abundantly clear is that, together, we hold the keys to unlock net zero progress at a much greater speed than is currently possible — something that is increasingly important as the timeframe for targets to be achieved narrows.

Here are my three main takeaways from the meeting on the role carbon markets can have in the global transition to net zero:

1. Carbon markets are a gateway to short-term action

There is now consensus that all companies, sectors and countries should prioritize reducing their own emissions as much as possible before considering offsetting. This is known as the “mitigation hierarchy”. But for many sectors, such as shipping, or aviation, where the technology isn’t currently available for full decarbonization, offsetting will play a critical short- to medium-term role in climate action because it’s the only option. Effective carbon markets, with high levels of transparency about the quality of the credits available, will achieve maximum environmental impact at least cost.

2. The private sector can supercharge action

Governments and regulators wield great power, but cannot move at the speed required to achieve transition targets. This is why, in the short-term, voluntary action from the private sector has to fill the gap. The more the private sector can come up with high-integrity, high-impact approaches to tackling emissions — through the mitigation hierarchy, and including through high-quality offsetting — the easier it will be for regulators to enshrine this best practice. The alternative would be for the regulators to come up with their own rules which would then be imposed on the private sector, causing unnecessary disruption.

3. Both removals and avoidance solutions are required to achieve net zero

Some in the market see a false dichotomy between credits that are seen as avoiding emissions and credits that are seen as removing greenhouse gasses. But, provided they are high quality, both “avoidance” and “removals” credits can achieve the exact same impact — though over the coming decades we will see a shift towards more removals credits, as regulations around the world obviate the need for avoidance credits. With high-quality data can we get a true sense of the quality of each credit, regardless of whether they are avoidance or removals. Given the scale of the climate crisis we face, we need every lever available — including both avoidance and removals credits — rather than getting caught up in pointless debates about which is better.

Overall, what I took away from San Francisco with me was even more determination to keep doing what we’re doing at Sylvera.

This will not be easy. I, like many others, have concerns about how we, as a species at the global level, don’t seem to be doing enough, fast enough.

The meeting made clear that the public sector alone can’t tackle climate change — the private sector has a huge role to play. As co-founder of a climate tech company, this is inspiring, motivating, and daunting. It reaffirms to me the importance of our work, and the importance of further developing partnerships with the public sector to make sure we all get this right, together, the first time.

This blog first appeared on the Sylvera website.

Roadmap Announced for New Voluntary Carbon Market Standards for High-quality Carbon Credits from the Integrity Council for the Voluntary Carbon Market

16 March 2022  |  The Integrity Council for the Voluntary Carbon Market (the Integrity Council), an independent governance body for the voluntary carbon market, announced today it will launch a definitive set of global threshold standards that will set a global benchmark for carbon credit quality in the third quarter of 2022, following a public consultation opening in May.

The Core Carbon Principles (CCPs) and Assessment Framework (AF) will set new threshold standards for high-quality carbon credits, provide guidance on how to apply the CCPs, and define which carbon-crediting programs and methodology types are CCP-eligible.

Annette Nazareth, Co-Chair of the Integrity Council, said: “To secure a liveable future, we urgently need to ensure that every tool available to us is working as effectively as possible to reduce and remove greenhouse gas emissions. The voluntary carbon market has a critical role to play in accelerating a just transition to 1.5 degrees centigrade, but it can only succeed if it is rooted in high integrity.”

The standards are being developed by the Integrity Council’s Expert Panel which is made up of twelve of the world’s leading scientists on the carbon markets, supported by eleven subject matter experts in topics ranging from carbon sequestration science to the rights of indigenous peoples and local communities (IPLCs).

Hugh Sealy, Co-Chair of the Integrity Council, said: “High quality carbon credits are an important complementary tool to reduce and remove greenhouse gas emissions above and beyond what would otherwise be possible, and to channel finance towards climate- resilient development. If we build integrity, scale will follow, but to do that, we must listen and learn from many different sources of knowledge and experience in the market and society at large, which is why we’re launching a full public consultation.”

The public consultation will be open to all, and is expected to attract interest from key stakeholder groups engaged in the voluntary carbon market, including finance, business, NGOs, IPLC groups, scientists, governments and members of the public. It will be

overseen by the British Standards Institute (BSI), which has over one hundred years of experience in standard setting, and will launch in May, lasting 30 days. Details on how to take part will be published on the Integrity Council website, and will be communicated via the Integrity Council’s newsletter and social media channels.

The Integrity Council’s Expert Panel is co-chaired by Pedro Martins Barrata of EDF (Environmental Defense Fund), Daniel Ortega-Pacheco (ESPOL Polytechnic University) and Lambert Schneider (Öko-Institute). The list of core Expert Panel members was published for the first time today on the Integrity Council website.

About the Integrity Council

The Integrity Council for the Voluntary Carbon Market (Integrity Council) is an independent governance body for the voluntary carbon market, which aims to ensure the voluntary carbon market accelerates a just transition to 1.5 degrees centigrade.

The Integrity Council sets and enforces definitive global threshold standards for the voluntary carbon market, drawing on the best science and expertise available, in order to channel finance towards genuine and additional greenhouse gas reductions and removals that go above and beyond what can otherwise be achieved, and that contribute to climate resilient development.

MEDIA ENQUIRIES

Integritycouncil@browningenvironmental.com

Opinion
Blockchain for better: Untangling tokenisation and carbon markets

This blog first appeared on Carbon Pulse.

With the hype around web 3.0, it’s important to be mindful about which decentralised approaches to deploy in carbon markets, and – importantly – how to deploy them. Technology is agnostic toward its ultimate effect. Software can help you shop from your sofa or it can deliver malware that takes down an energy grid.

So it is with tokenisation of carbon credits.

Done right, tokenisation can increase access to carbon markets, create a better record of transactions, and when used with smart contracts, digital MRV systems and good governance it can create trust in areas lacking proper governance and help narrow the gap between those creating the impact and those who wish to support, sponsor or fund it.

Done poorly, it can be a wasted use of a distributed ledger technology (and the associated energy requirements), or worse, a scam.

Representing real carbon credits

The first premise is perhaps an obvious one: to deliver the impact that’s promised. Technically, tokenisation can represent anything the issuer wishes. This is why it’s important that when a token is marketed as a carbon credit or as delivering the impact a carbon credit represents – one tonne of CO2 permanently prevented from entering the atmosphere – it is professionally and independently verified.

This means that any token billed as reducing, compensating for, or offsetting your footprint has all the fundamental attributes for carbon credits: real, additional, permanent, robustly quantified, independently verified, and uniquely claimed.

Of concern, there are a number of emerging initiatives that implicitly or explicitly market themselves as carbon credits, yet are not. Some promise to compensate for, or even “erase” your carbon footprint when you purchase their tokens, yet fail to meet common standards for additionality, monitoring, or permanence.

While these efforts may indeed deliver some positive impact for some period of time, to claim to have offset or compensate (i.e. to leave the atmosphere better off than if the token had not been purchased and retired) a tonne of carbon simply does not hold up.

Full transparency of attributes of the underlying credit

Beyond the fundamental characteristics required of a carbon credit, tokenisation should leverage the power of its technology to catalyse a race to the top rather than simply using new infrastructure to facilitate business as usual.

Klima DAO made a splash with their launch in late 2021, backed by celebrity investor Mark Cuban. Klima DAO considers any Verra credit a “Base Carbon Tonne”, which comprises a pool from which $KLIMA coins can be minted.

Yet when some very cynical actors bridged 670,000 VCUs  from a HFC23 decomposition project in Yingpeng, China, a project type that had been effectively discredited in the early 2010s, the liquidity tradeoff became very clear. While this was unlikely to be the only factor affecting price, $KLIMA saw a precipitous drop in value from which the coin has not recovered.

Proponents of blockchain celebrate its capacity for transparency. But if this power is wielded only on tracing transactions, not the details of what’s being transacted or by whom, we’ve missed a trick – especially in such a heterogeneous market.

Fully capturing the detailed attributes of carbon credits can counter the negative impacts of commodification and incentivise carbon projects with deep sustainable development impact. For example, community services projects like off-grid renewables, clean cooking solutions, or clean water access often deliver benefits far beyond the carbon reduction – for better health, improved livelihoods, and even reduced deforestation and biodiversity conservation.

Clarity of verified impact can allow credits to be valued accordingly and catalyse even greater positive benefits – enabling carbon markets to deliver on climate justice.

Compliance and engagement with issuing standard

Carbon markets are becoming increasingly diversified, making the tracking of credits and claims made by relevant parties increasingly critical. The public registry of the standard that issued a credit is the source of truth for the status of that credit. This means that any secondary market, blockchain-based or otherwise, must be in compliance with the issuing standard’s Terms and Conditions to ensure legal ownership of the credit and rights to claim the underlying impact, and must communicate any change in status of the credit back to the registry.

Simply issuing a token does not confer legal rights to the underlying credit or impact the token is said to represent. In fact, most standards have legal terms that explicitly prohibit this. In extreme cases, a registry may have to cancel credits because of a grievance or non-conformity. Without two-way communication with the issuing standard, tokens representing those credits risk becoming meaningless.

Proper integration with the issuing standard and its legal terms allows for harmonisation with national and global registries needed report accurately on progress to the Paris Agreement, avoiding double counting and double claiming. This is the ground truth for knowing how we’re doing in combatting the climate emergency, and protects the rights and claims of users up and down the value chain.

Tokens for good

Gold Standard has written extensively about the potential for innovative technology to positively disrupt carbon markets and climate action generally. We welcome the transformative potential of tokenisation of positive impact designed with these principles in mind.

We remain open to partnerships in this fast-moving space and will explore this and further next-generation digitisation approaches within the Gold Standard IQ programme recently funded by Google.org  and through our Open Collaboration for Digital MRV announced at COP26.

Stay tuned for more details about how we plan to authorise tokenisation of Gold Standard credits.

 

Opinion
Corresponding Adjustments and their Impact on NDCs and Additionality

09 March 2022  |  The Paris Agreement is a legally binding international treaty on climate change. One of its elements is to establish the basis for the development of a new international carbon market. However, depending on the specifications of the transactions, international emissions trading could result in neutral and even negative global climate impacts. Voluntary markets, on the other hand, could continue to provide the basis for enduring international cooperation for climate change mitigation.

The Paris Agreement, Nationally Determined Contributions, and Emissions Trading

Article 6 of the Paris Agreement[1] creates the basis for international cooperation in implementing Nationally Determined Contributions (NDCs)[2], and, ultimately, allows for higher ambition in the parties’ mitigation and adaptation options. The objective of Article 6, therefore, is to assist parties in following a path that would result in a net-zero greenhouse gas (GHG) emissions scenario. The goal is that GHG emissions would be kept to a minimum, and any that do occur will need to be counterbalanced by an equivalent amount of carbon sequestration. Further, it’s stated that this should occur “on the basis of equity, and in the context of sustainable development and efforts to eradicate poverty.”[3]

While at this stage this objective is neither economically nor socially possible, countries are encouraged to establish a trajectory where emission levels are reviewed periodically, and new, more ambitious targets are gradually set.[4]  However, to engage in more ambitious low emissions trajectories there is a need for significant levels of investment – often beyond the means of some countries. [5]

To help lower-income countries meet their NDCs, the Paris Agreement also creates two new ‘cooperative approaches’. Article 6.2 establishes that Parties can voluntarily provide financial assistance to each other, in exchange for an amount of ‘Internationally Transferred Mitigation Outcomes’ (ITMOs) to be transferred and credited to the account of the country providing the finance. Similarly, Article 6.4 allows the private sector to contribute to the mitigation of GHG emissions of one Party and that the resulting emission reductions can be used by another Party to fulfill its NDCs.[6]

Corresponding adjustments and developing countries’ NDC ambition

Enthusiasm for international trading, however, must be tempered by the need to avoid double counting of emission reductions and ensure ‘overall mitigation in global emissions’ – another objective of the Agreement. In order to ensure the integrity of the international GHG accounting system, cross-boundary emissions transfers must be accounted for by a system of Corresponding Adjustments. This mechanism subtracts the GHG emissions reductions from the host country’s account and adds them to the importing country’s account.

The requirement for corresponding adjustments can have a negative impact on developing countries. Unlike the Kyoto Protocol, when developing countries did not have emission reductions targets, under the Paris Agreement, all countries have to meet the emission targets stated in their respective NDCs. This creates a conundrum: while developing countries depend on inward investment to reduce their emissions, corresponding adjustments required for emissions trading could affect their ability to meet NDC targets. In essence, host countries are disincentivized to adopt ambitious NDCs, as these would jeopardize their ability to attract inward investment and climate finance[7].

Voluntary carbon markets as a basis for international climate cooperation

Voluntary carbon markets, on the other hand, could provide the basis for international climate cooperation without being detrimental to host countries’ targets.

Voluntary projects are often financed by companies that are not mandated to reduce their emissions and therefore do not need these credits for domestic or international compliance.[8] The emission reductions created by their voluntary projects, consequently, do not need to be reflected in any official accounts: the seller’s credits are not debited from the host country’s account, and not added to the national account of the buyer.

Of course, this would not be the case for “mitigation outcomes authorized for use towards the achievement of NDCs and/or Other International mitigation purposes” (e.g., CORSIA and the VCM). In this case, the emission reductions should be subjected to corresponding adjustments.

Corresponding adjustments and environmental additionality

While the requirement for corresponding adjustments was introduced to ensure environmental integrity of Article 6, it is important to recognize that corresponding adjustments could also have negative implications for climate additionality. Given that the emission reductions deducted from a host country authorises GHG emissions on the purchaser’s country, corresponding adjustments result in a zero-sum game with no positive global climate benefit[9]. However, such trades could also result in negative impacts on the host country’s ability to meet its NDC (see Table below).

  NDC coverage of project sector Corresponding

Adjustments

Climate Impact Impact on host country’s ability to meet its NDC
Compliance trading (Article 6)

 

Covered by NDC Requested by UNFCCC Neutral Negative as ITMOs will need to be transferred (and therefore subtracted from NDC achievement)
Outside NDC Requested by UNFCCC Neutral Negative as ITMOs will still need to be transferred, increasing the burden on the sectors covered in the NDC
Voluntary transactions

 

Covered by NDC Not needed Neutral Positive – Contributes to the Host Country’s NDC effort
Covered by NDC Demanded by buyer Neutral Negative as ERs are subtracted from country’s NDC achievement
Outside NDC Not needed Additional Positive – Does not impact Host Country’s ability to meet its NDC and paves the way for widening the scope of current NDCs.

Voluntary transactions without corresponding adjustments, instead, can assist countries in meeting their NDC targets and result in emission reductions that either contribute to, or that are additional to the targets of the Paris Agreement, a truly positive outcome. 

Footnotes:

[1] United Nations Climate Change – Cooperative Implementation: https://unfccc.int/process/the-paris-agreement/cooperative-implementation#:~:text=Article%206%20of%20the%20Paris,sustainable%20development%20and%20environmental%20integrity.

[2] United Nations Climate Change – The Paris Agreement and NDCs: https://unfccc.int/process-and-meetings/the-paris-agreement/nationally-determined-contributions-ndcs/nationally-determined-contributions-ndcs

[3] As per Article 4.1 of the Paris Agreement, “Parties aim to reach global peaking of greenhouse gas emissions as soon as possible, recognizing that peaking will take longer for developing country Parties, … and to undertake rapid reductions thereafter in accordance with best available science, so as to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century”.

[4] See, for instance, Fransen, et al., 2017: Enhancing NDCs by 2020: Achieving the goals of the Paris Agreement. WRI. https://files.wri.org/s3fs-public/WRI17_NDC.pdf

[5] For instance, for the 14 countries that provided clear cost estimates for the implementation of the land-use components of their NDCs, the mitigation cost a total US$ 20.6 billion, while the adaptation cost estimates total US$ 10.5 billion, for the period 2020 – 2030. See Gabrielle Kissinger, Aarti Gupta, Ivo Mulder, Natalie Unterstell, 2019: Climate financing needs in the land sector under the Paris Agreement: An assessment of developing country perspectives. Land Use Policy, Volume 83, April 2019

[6] In addition to transactions that transfer ITMOs to buyer countries’ accounts, Article 6 also recognises that these could be used for Other International Mitigation Purposes, such as CORSIA and even for voluntary commitments.  In both cases, though, if these activities are recognised and authorised by the host country, the ITMOs need to be transferred from host country accounts and reallocated elsewhere.

[7] See, for instance, S.R. Choudhury, 2021: Corresponding Adjustments, Equity, and Climate Justice www.ecosystemmarketplace.com/articles/shades-of-redd-corresponding-adjustments-equity-and-climate-justice/

[8] There are different types of buyers and motivations to invest in the VCM, from pre-compliance to corporate responsibility, but the immediate impact is the same – they do not need ITMOs given that they do not need to report to any compliance regime (at least at this point in time).

[9] The only positive climate impact would come from the 5% share of proceeds inbuilt in Article 6.4, that are not “correspondently transferred” to the buyer’s country.

Photo: AdobeStock

Addressing the Climate and Biodiversity Crises:
WCS and Everland Forge a New REDD+ Partnership

3 March 2022 | A new agreement between the Wildlife Conservation Society (WCS) and Everland will scale a portfolio of forest conservation REDD+ projects to achieve at least 10 million tons of verified emission reductions (VERs) annually with an estimated value of $2 billion over the next decade. Everland will provide funding for the creation, development, and implementation of up to 15 REDD+ projects globally, and serve as the exclusive marketing agency for the VERs generated by the projects.

This collaboration with Everland stems from a mutual interest in scaling REDD+ as a mechanism to halt deforestation, mitigate climate change, protect wildlife, and support local communities through market-based carbon financing.

The program builds on WCS’s long history of working on the ground to save wildlife and wild places in nearly 60 countries worldwide. WCS sees REDD+ as a critical tool for fighting climate change and keeping global warming within 1.5 degrees Celsius—the target agreed to in the Paris Agreement to avoid the worst impacts of climate change.

Through this agreement, WCS will facilitate the development of new projects in collaboration with and on land owned or controlled primarily by national governments, as well as local governments, communities, and private landholders.

Consistent with a recent civil society consensus agreement on high-quality tropical forest carbon credits, WCS and Everland share the goal of transitioning from project-based REDD+ support to jurisdictional or national programs or nesting projects within larger-scale programs where they exist and can maximize emission reductions and mitigate climate change impacts.

Everland is a specialized marketing company exclusively representing a portfolio of some of the most impactful REDD+ projects across the globe that protect wildlife and enhance the well-being of local forest communities, including WCS’s flagship REDD+ project in the Keo Seima Wildlife Sanctuary in Cambodia.

The Keo Seima REDD+ project started in 2010 and protects one of the most important remaining intact forests in Cambodia. It is home to the Indigenous Bunong people and has one of the greatest diversities of species in any protected area in Cambodia. The project has issued over 16.7 million VERs by avoiding over 21,500 hectares of forest loss. Last year, the project achieved a long-standing goal: to become financially sustainable through the sale of its VERs. As part of this project, WCS has helped to secure land and resource tenure for local communities, improve protected area management, and establish sustainable alternative livelihoods.

Todd Stevens, Executive Director of the WCS Markets program, said:

“We must eliminate the source of 10 percent of annual global emissions by keeping forests standing. REDD+ is a means for generating the much-needed financial support for on-the-ground forest protection, wildlife conservation, and local communities. We are excited to partner with Everland on this work. They continue to serve an important role in the success of the Keo Seima project, and they share WCS’s values and ambition to scale REDD+ projects that contribute to the nature-positive mitigation action we need.”

Gerald Prolman, Everland’s CEO and co-founder said:

“Since 1895, WCS has established itself as one of the world’s most trusted, respected, and effective wildlife conservation organizations. We are extremely proud to have been chosen as WCS’s exclusive marketing partner and we’re excited to bring 15 new high-impact REDD+ projects to the market. The projects will help meet the surging demand for high-quality VERs that companies can use toward their climate and SDG targets.”

PHOTO CREDIT: Adam Roberts

About Wildlife Conservation Society (WCS)

WCS saves wildlife and wild places worldwide through science, conservation action, education, and inspiring people to value nature. WCS, based at the Bronx Zoo, harnesses the power of its Global Conservation Program in nearly 60 nations and in all the world’s oceans and its five wildlife parks in New York City, visited by 4 million people annually. WCS combines its expertise in the field, zoos, and aquariums to achieve its conservation mission. Through understanding critical issues, crafting science-based solutions, and taking conservation actions that benefit nature and humanity, WCS focuses on the biggest challenges facing long-term conservation efforts: climate change, sustainable financing, economic and food security, and data and science gaps. Visit newsroom.wcs.org. Follow @WCSNewsroom.

About Everland

Everland markets high-impact forest conservation projects in Southeast Asia, Africa, and Latin America that help governments and local communities prosper from protecting their forests and wildlife. Everland brings forest communities and corporations together in a common cause to protect some of the world’s most important and vulnerable forests. Visit https://www.everlandmarketing.com/.

Vietnam’s timber legality program not making a dent in risky wood imports

Reposted from Mongabay.com, originally published on 2 February 2022. Photo by Mongabay.

  • Despite new regulations to clean up Vietnam’s timber sector, importers continue to bring large volumes of tropical hardwood into the country from deforestation hotspots in Africa and Asia for use in products sold domestically.
  • In 2018, Vietnam signed a Voluntary Partnership Agreement with the EU to eliminate illegal timber from the country’s supply chains and boost access to the strictly regulated European markets.
  • However, importers say the new legality requirements introduced in 2020 to verify the legitimacy of timber brought into the country are “too confusing,” and customs data indicate few signs of a reduction in high-risk timber imports from countries including Cambodia, Cameroon, Gabon, Laos and Papua New Guinea.
  • Although Vietnamese authorities are taking steps to improve the situation, meaningful change is expected to take time; a switch by domestic consumers to products that use sustainable, locally grown timber instead of imported tropical hardwoods could solve many underlying problems, experts say.

Vast quantities of tropical hardwood from deforestation hotspots around the world continue to enter Vietnam, in spite of new regulations to clean up supply chains. In 2018, the country signed a deal with the European Union to reform its timber sector and, in return, boost access to the strictly regulated EU markets. But recently introduced mechanisms to eliminate illegal timber are failing, experts say.

“Basically, nothing has changed,” Phuc Xuan To, a senior policy analyst at Forest Trends, told Mongabay. “The authorities allow the importing companies to bring in high-risk timber … just as they did before.”

Thousands of enterprises import 5 million to 6 million cubic meters (177 million to 212 million cubic feet) of timber into Vietnam from more than 100 countries every year. At least one-third of this is tropical hardwood from locations such as Cambodia, Laos, Papua New Guinea and around 20 countries in Africa. The majority of these tropical imports are considered “high-risk” in terms of the legality of their source.

Given the range of sources and actors, “implementation to meet [the new EU-Vietnam legislative] requirements was always going to be a challenge,” Phuc said.

Forest in Massaha community forest in Gabon, one of Vietnam’s major timber-supply countries. Photo by ZB / Mongabay

The Vietnam-EU deal is a Voluntary Partnership Agreement under the EU’s Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan. It represents a commitment to work together to clean up Vietnam’s domestic timber market to ensure its exports comply with EU timber regulations. When fully implemented, all Vietnamese timber exports to the EU will be issued certificates that assure legality of origin and production.

Following the signing of the agreement in 2018, legality requirements were incorporated into domestic legislation in October 2020 via the Vietnam Timber Legality Assurance System (VNTLAS). This framework applies to both export and domestic supply chains, essentially entailing that all timber imported into the country is clean.

Distant timber meets domestic demand

Most imported high-risk tropical timber is destined for Vietnam’s domestic market, according to Phuc, where demand for luxury hardwood furniture is high. Locally sourced wood used to suffice, but Vietnam’s 2016 blanket ban on domestic logging of natural forests forced manufacturers to look elsewhere. At the same time, significant supplies from neighboring Cambodia and Laos dwindled due to increased efforts in those countries to curtail exports of unprocessed timber.

To plug the supply gap, roughly 1.3 million m3 (46 million ft3) of timber enters Vietnam annually from more than 20 African countries, according to Forest Trends. Vietnam is now the second-largest importer of African timber in the world, behind China.

Cameroon is the principal supplier, providing roughly 60% of Vietnam’s tropical timber imports. Other major sources include Angola, the Democratic Republic of Congo, Gabon, Nigeria and Suriname, each of which exports more than 10,000 m3 (353,000 ft3) of logs and sawn wood to Vietnam each year.

Customs data compiled by Forest Trends indicate no signs of a reduction in high-risk timber imports since the VNTLAS regulations came into effect. Between January and October 2021, more than 400,000 m3 (14 million ft3) of wood entered Vietnam from Cameroon — around two-thirds of the total imported during the whole of 2020. Furthermore, the volume of timber from Laos and Cambodia during the same period had already exceeded figures for the whole of 2020.

Maintaining such imports “will continue to bring bad reputations to the Vietnamese timber industry, and could have unpredictable consequences for the timber industry,” says a recent Forest Trends report.

A critically endangered red-shanked duoc langur in Vietnam. Natural forests in the country are among the species’ last remaining habitats. Image by Rhett A. Butler for Mongabay

Complex framework obscures mitigation

The persist import of high-risk timber can be mostly attributed to poor implementation of new “due diligence” requirements. Under the new VNTLAS rules, Vietnamese importers must perform additional control measures when they deal with high-risk timber, such as compiling documentation that clearly proves the legality of the wood. But regulations in many supply countries are opaque and the necessary documents are challenging to procure and verify.

Importers say the due diligence process is “too complicated,” and they don’t know which authorities in supply countries issue the necessary paperwork, according to Phuc. In some cases, timber brokers in supply countries refuse outright to share information pertaining to harvest permits and concession permits because they are considered confidential.

“If you don’t know what the legality framework is in the source countries, then how can you know whether the import is legal?” Phuc said. “And if you are heavily relying on paper documents, how can you guarantee the legality? Paper can be bought.”

Phuc said further issues arise when importers buy wood from Chinese companies operating and liaising with harvesting, processing and transportation firms in many African supply countries. “The Vietnamese importers outsource that type of paperwork to the Chinese companies, who pass documents on, but they are not sufficient for the Vietnamese authorities or the VNTLAS requirements.”

Chinese timber companies operating in Africa have a murky track record. A 2019 investigation led by the Environmental Investigation Agency (EIA) uncovered claims of concessions obtained through bribery, along with allegations of tax evasion and overharvesting of trees in the Republic of Congo and Gabon. Meanwhile, Chinese traders in Cameroon reportedly incentivize the harvesting of African zebrawood (Microberlinia bisulcata), a hardwood species listed as critically endangered by the IUCN.

Reliance on paper documents and third parties to verify timber legality leaves room for malpractice: “[Importers] have to have additional mechanisms to make sure that the documents given to [them] are authentic,” Phuc said. “What is needed here is much more than documents.”

A 2021 Forest Trends report urges the Vietnamese government to do more to open bilateral dialogue with authorities in supply countries to find better ways to cooperate on timber legality issues.

Deforestation near Nam Et-Phou Louey National Protected Area. Image by Rhett A. Butler for Mongabay

Exporters exasperated by slow progress

The slow implementation of the VNTLAS controls has frustrated companies engaged in Vietnam’s lucrative export markets, according to Phuc. The relentless influx of high-risk timber for domestic products could jeopardize trade with not only the EU, but also the U.S., a market worth more than $7 billion in 2020.

Exporters were threatened with tariffs in October 2020, when the Office of the U.S. Trade Representative investigated allegations that illegally harvested or endangered timber was being imported into Vietnam in violation of its own laws, those of the source country and CITES regulations.

Although ultimately no tariffs were imposed, the investigation resulted in an agreement on illegal logging and timber trade between the U.S. and Vietnam in which the Vietnamese government committed to strengthening the VNTLAS and developing memorandums of understanding with high-risk timber-producing countries.

Consequently, in November 2021, Vietnam’s Ministry of Agriculture and Rural Development proposed MOUs with Cameroon, Laos and several other timber supply countries. Given that several of these countries already have Voluntary Partnership Agreements with the EU to address illegal logging, experts are hopeful they will be receptive to cooperation.

“Strengthening bilateral dialogue with Vietnam’s major supplying countries, and with Vietnamese importers, will be critical in allowing the government to make timely adjustments in policy implementation and improvements of its effectiveness,” the Forest Trends report says.

Wood Truck removing a large emergent tree. District of Ebolowa, Cameroon. Image by Ollivier Girard for CIFOR via Creative Commons (CC BY-NC 2.0)

Progress to improve the system underway

Notwithstanding the current shortcomings, measures to improve the situation are underway. Vietnamese authorities, in cooperation with EU partners, are taking steps to review, clarify and reinforce the VNTLAS related legislation, including the regulations on imported timber, according to Bruno Cammaert, forestry officer at FAO’s regional office for Asia-Pacific and regional coordinator for the FAO-EU FLEGT Programme.

“During 2022 the Vietnam Administration of Forestry plans to evaluate implementation of VNTLAS Decree No 102 and other VNTLAS related legislation so far, which will likely lead to some adjustments to strengthen the Decree,” Cammaert told Mongabay in an email. He added that guidance on import controls has been developed in consultation with Vietnam’s customs and forest protection agencies and training programs are being rolled out nationally.

“A recent report found that in 2020 there were 4,500 enterprises and 1,690 other types of organizations and individuals involved in importing timber and timber products [into Vietnam],” Cammaert said. “It will obviously take some time and effort to build awareness, capacity and compliance amongst all these importers, as well as build the capacity of the large number of Customs Officers and Forest Rangers [but these] combined efforts should have a positive impact on the reinforcement of import related controls and due diligence in the coming period.”

Rainforest timber awaiting transport and processing in Indonesia where FLEGT licensing is operational. Image by Rhett A. Butler for Mongabay

Toward FLEGT licensing

The objective of the EU-Vietnam Voluntary Partnership Agreement is to introduce a licensing system, whereby Vietnam can issue EU FLEGT licenses to accompany verified legal timber exports into the EU. While there is still a long way to go until Vietnam’s timber legality assurance system fully complies with EU requirements, lessons can be learned from other countries’ experiences.

Of 15 countries that currently have VPAs with the EU, Indonesia is the only country to currently operate a FLEGT licensing system. Since the country signed a VPA in 2013 and began FLEGT licensing in 2016, annual deforestation rates have dropped by 56%. Nonetheless, “there are still many weaknesses” with the system, Deden Pramudiana, a campaigner for the Indonesian Independent Forest Monitoring Network (JPIK), told Mongabay.

Independent monitoring by JPIK in cooperation with Indigenous peoples and local communities in 2020 and 2021 uncovered multiple violations of Indonesia’s timber legality system. Many of the breaches echo those encountered in the nascent Vietnamese system. Violations ranged from logging companies cutting down trees outside their concessions, to woodworking shops manipulating delivery records to obscure timber origins, and exporters selling forged certificates.

Furthermore, critics of VPA implementation in Indonesia say strict enforcement of regulations disproportionately impacts micro, small and medium-size enterprises (MSMEs) that lack the financial resources to adapt to new international standards. “In Indonesia, the businesses benefiting from FLEGT licensed timber are mainly large-scale,” Phuc said. “The small, medium and micro operators are not benefiting.”

Woodworking shop in Vietnam. Photo by Katina Rogers via Creative Commons (CC BY 2.0)

Domestic focus could resolve many issues

To avoid similar outcomes in Vietnam, experts say the government should focus on building the capacity of MSMEs and domestic plantations, most of which are operated by smallholders. Vietnam produces more than 20 million m3 (706 million ft3) of plantation wood annually, but it is rarely used for furniture because plantation timber, such as acacia, is deemed inferior to hardwoods. Consequently, the majority is exported as woodchip.

According to Phuc, many problems that underly Vietnam’s timber sector could be solved simultaneously if domestic consumers would switch to products that use sustainable, locally grown timber instead of imported tropical hardwoods.

Such a consumer shift would boost opportunities for smallholder plantation growers and reduce transport-related delays and costs, thereby improving the resilience of domestic supply chains. It would also lower the risk of sanctions in lucrative export markets. And, crucially, it would mean Vietnam would no longer risk contributing to deforestation in other countries.

“Some say that it would incentivize clearing natural forest to grow plantation timber, but domestic policy and implementation can be there to make sure that doesn’t happen,” Phuc said. On the other hand, “if you continue to allow tropical high-risk timber imports as an alternative, then you are a source of deforestation to another country.”

Opinion:
Where Does Healthy Critique End and Cynical Denial Begin?

Steve Zwick has been covering climate issues for more than 30 years, including 15 as managing editor of Ecosystem Marketplace. He currently produces the Bionic Planet podcast, and the views expressed here are his and his alone.

11 February 2022 | A friend of mine, after losing a jiujitsu tournament, praised her opponent.

“Fighting her was like grappling with air,” she said. “There was nothing to get hold of.”

I felt the same grappling with science deniers back in the day – not because they’re nimble (they’re not), but because they don’t play fair.

Liars lie, and we all make mistakes, but science deniers deploy half-truths and innuendo. They don’t necessarily distort their facts but instead embed them in a false narrative, often by building half-truths on half-truths with long strings of rationality between them. In the hands of a skilled denier, half-truths are like signposts that take you just a half-step off course. That might not sound like much, but if ten are lined up with skill and spaced along familiar-looking roads, you’ll find yourself a lot more than five steps from reality.

Whack-a-mole doesn’t work against half-truths and innuendo. Context does, and that’s what I’m trying to provide in this series – first with a look at past media failures, then with a history of Natural Climate Solutions (NCS), and now with a look at the tropes of science denial, drawing heavily on the work of Mark and Chris Hoofnagle.

The two brothers began exposing science denial in the mid-2000s, and scientists from several disciplines kicked their ideas around until broad agreement emerged on the following telltale tropes:

  1. Setting impossible expectations for what science can achieve,
  2. Deploying logical fallacies,
  3. Relying on fake experts (and denigrating real ones),
  4. Cherry-picking evidence, and
  5. Believing in conspiracy theories.

John Cook of the Center for Climate Change Communication coined the acronym FLICC, for “Fake experts, Logical fallacies, Impossible expectations, Cherry-picking,” and he created an extensive taxonomy to provide some structure.

He readily concedes that all these tropes are subsets of the second one, “Deploying logical fallacies,” but he provides a framework that emphasizes those logical fallacies most common to science denial. It’s illustrated here:

 

Trope 1: Setting Impossible Expectations for Science

Science isn’t about absolutes. It’s about a preponderance of the evidence and concurrence of experts, especially when you have social sciences layered on top of physical sciences, as is the case with forest-carbon methodologies.

Strip away the half-truths and innuendo, and you’ll find that all of the stories I’m discussing in this series do have germs of truth in them, but those germs are pretty innocuous. They all boil down to the fact that forest-carbon methodologies aren’t magical or eternal but instead represent best efforts underpinned by a lively debate over how to improve them. Like the right-wing merchants of doubt who turned the strengths of climate science upon itself throughout the 1990s and 2000s, carbon market opponents are bending over backward to portray lively debate as something dark and sinister while ignoring the complex nature of the challenge we face.

Nearly all of the questionable coverage, for example, takes issue with the use of counterfactual analysis to construct project baselines, often relying on the mere sound of the term to imply that something shady is happening in secret recesses of the climate community.

This is absurd.

Counterfactual analysis simply means you’re looking at a situation and asking what would happen if things were different. It is a cornerstone of the impact analyses that government agencies and NGOs around the world use to see what works and what doesn’t. It includes process tracing, which means you’re looking beyond correlation to a clear series of causes and effects.

Greenpeace is technically correct when it points out that “it’s difficult to judge if the emissions reductions claimed by REDD+ projects are real,” and I’m sure they’re accurately quoting ecosystem scientist Alexandra Morel as saying, “It’s impossible to prove a counterfactual.”

She’s right, but no one claims otherwise – at least, not since Karl Popper and the triumph of fallibilism. Even physicists don’t “prove” anything. They provide actionable models that work well enough until something better comes along, at which point we change – but only after that better way passes the same tests that the earlier ones did. Living systems are more complex than rocks and crystals, while social systems are more complex than squids and mollusks. That’s why we look at a preponderance of evidence and the majority views of experts rather than outlier events or isolated opinions when harvesting the lessons of the past decade to develop more effective approaches going forward. The goal is continuous improvement in the real world, not imaginary perfection in textbooks.

The late, great statistician George Box used to tell his students that “all models are wrong, but some are useful.” It’s a statement he elaborated on in 1976. “Since all models are wrong, the scientist must be alert to what is importantly wrong,” he wrote. “It is inappropriate to be concerned about mice when there are tigers abroad.”

Trope 2: Logical Errors

Logical errors are difficult to correct because, unlike simple lies, they can unfold across pages and paragraphs rather than sentences. The facts are often right, but the context is incomplete or the conclusions are, well, illogical.

The Greenpeace story, for example, opens with Britaldo Silveira Soares-Filho, a respected Brazilian cartographer who oversaw the creation of a well-known environmental modeling platform. In 2007, Greenpeace tells us, an unnamed Brazilian NGO invited Soares-Filho and “an array of other academics focused on the Amazon rainforest” on a three-day boat ride down the Rio Negro River to persuade him to “help rubber-stamp a carbon offsetting project.”

2007, you may recall, was a pivotal year for REDD+, and NGOs were trying to get input from as many experts as possible. I’m guessing that boat trip was part of this effort, but we don’t really know because Greenpeace doesn’t tell us the name of the Brazilian NGO, the name of the project he was expected to “rubber stamp”, how he had the power to rubber-stamp it, or who belonged to this “array of other academics” and what happened to them — did they drown? Were they eaten by piranhas?

All we know is that when Soares-Filho got back to his office, he “decided that he didn’t want his world-leading software used for [REDD+].”

I e-mailed him to find out why and he responded immediately.

“Models are used to avert an undesirable future, not predict the future,” he answered. “Models are not crystal balls. Models are a sign to help devise policy and evaluate policy choices.”

That’s not a controversial statement, and most of the people developing REDD+ projects would agree with it – even if they disagree with Soares-Filho’s conclusions on REDD+. He’s not revealing a deep, dark secret here but rather expressing his take on a very public philosophical disagreement that major outlets simply ignored for decades.

To its proponents, REDD+ is a de-facto policy tool. It fills gaps that current policies don’t address and it financially supports policies that exist but haven’t been funded, among other things. REDD+ is, again, a tool for implementing policy or for going beyond policy, but it’s not a magical replacement for policy.

From a REDD+ proponent’s perspective, REDD+ uses modeling the way Soares-Filho advocates: namely, to identify and avert undesirable futures. It does so, however, by using market mechanisms instead of relying purely on command-and-control approaches, and we know Greenpeace’s views on market mechanisms.

There could have been some value in unpacking this decades-old debate and breaking it down for a mainstream audience, but that’s not what Greenpeace did. They framed it as evidence of a deep, dark secret instead of what it is: namely, a philosophical dispute over which reasonable people can disagree, but where a clear concurrence of experts exists.

This is the appeal-to-authority fallacy – namely, framing an expert opinion as evidence rather than what it is – an opinion. Greenpeace does this throughout the piece, where almost every opinion they agree with becomes a “finding” or a “revelation” discovered through an “investigation”, while every program they want to slam becomes a “scheme”. They describe verified results as “promises”, ignoring the fact that funds are allocated for results, not promises.

This verbal sleight-of-hand leads a trusting reader to the next half-truth: an incomplete description of modeling and a dismissal of counterfactual analysis as “fantasy”.

Greenpeace also repeatedly begs the question — another logical error — by citing “findings” that pop up out of nowhere, and they seem to enjoy appeals to ignorance: comparing the probabilistic nature of reference levels to some magical, unattainable certainty.

The fountainhead of all their fallacies is the false dichotomy of offsetting vs reducing internally — the framing of offsets as a “license to pollute.” This is built on the premise that every offset purchased is a reduction not made. I’m sympathetic to this fear, but while plenty of companies certainly do believe they can buy offsets instead of reducing, that’s not what’s happened historically, and the answer isn’t to pretend the offsets themselves don’t work. It’s to enforce high quality on the offsetting front, which will drive up prices, and to embrace protocols for carbon-neutral labeling.

Ecosystem Marketplace conducted an analysis of buyers in 2016 and found companies that voluntarily purchased offsets tended to do so as part of a structured reduction strategy, and plenty of executives have told me that offsetting acted as a gateway strategy. Once they started offsetting, they had a price on carbon, and once they had a price on carbon, they started seeing places to cut emissions.  (For details, see “Debunked: Eight Myths About Carbon Offsetting.”)

Bloomberg, meanwhile, has run several pieces on a theme spelled out most clearly in “These Trees Are Not What They Seem,” which takes conservation groups to task for financing their operations through the sale of carbon credits – ignoring the fact that carbon markets emerged in part to overcome the short-term, fickle nature of philanthropic funding. This argument would make sense if money grew on trees, but it doesn’t – at least not without the help of carbon markets. In that piece, the usually reliable Bloomberg commits several logical errors, chief among being a misrepresentation of carbon finance, slothful induction, and oversimplification.

Trope 3: Relying on Fake Experts (and Denigrating Real Ones)

I don’t like the term “fake experts,” because it implies nefarious intent. That may have been the case with the original Merchants of Doubt, but I don’t think that’s always the case here. I instead prefer terms like “false experts” or “false authority.     ”

So, what is a false expert? It can be someone whose credentials are dubious, but more often than not it’s someone whose credentials are just not sufficient enough to warrant the status they’re being accorded. That could be a credentialed person whose outlier views are framed as being superior to scientific consensus, which is why Cook’s taxonomy places “magnifying the minority” under the “relying on fake experts” category.

You magnify the minority when you give outlier ideas and untested findings the same or higher status than ideas and findings that have passed the test of time. This is the fallacy the original Merchants of Doubt excelled at, and it’s also a Greenpeace favorite (ironic, since they’re also among the best at outing others who deploy the tactic).

I should emphasize that identifying a person or entity as a false expert doesn’t mean they’re bad people or all their research is flawed, just as even bona fide experts aren’t omniscient. All research should be evaluated on its own merits.

Speaking of research, I’d like to propose a new category called “Relying on Flawed Findings” – that is, findings that aren’t just minority views but are objectively, verifiably flawed – yet still garner inordinate amounts of media attention.

One of these is a paper called “UN REDD+ Project Study,” which comes from a company called McKenzie Intelligence Services (MIS). Greenpeace and the Guardian hired them to evaluate 10 carbon projects in the Amazon, despite the fact that MIS has no discernable expertise in forest carbon. Greenpeace and the Guardian have repeatedly referenced the paper to support their stories, but the paper itself is nowhere to be found.

Why not?

I’ve seen the paper, and the answer is: it’s about what you’d expect from a small company hired to perform analysis outside its area of expertise. Even the title is inaccurate. “UN REDD+” implies they’re looking at REDD+ under the Paris Agreement, when in fact they’re looking at voluntary REDD+ projects – or trying to. The entire analysis is based on how forested areas look from the sky, via low-resolution satellite images, and not on ground samples and models of socioeconomic forces. As if that weren’t bad enough, their photo analysis confused rivers with highways and used forested areas in Bolivia to model deforestation in Guatemala. In the end, it was too embarrassing for even Greenpeace to release publicly, but they and the Guardian continue to cite the fake findings of this phantom analysis in their ongoing coverage.

Another organization to garner undue influence is a small operation called CarbonPlan, which has produced a simple numerical rating system for grading the quality of carbon projects – one of several such efforts underway.

Initiatives like this can be useful as carbon markets finally go mainstream and millions, perhaps billions, of people try to engage them with little prior understanding. Done right, rating systems can provide a useful adjunct to the pass/fail approach carbon standards take as well as additional backstopping to auditors. Done wrong, however, they could institutionalize the practice of magnifying the minority. That, I fear, is the direction CarbonPlan is going.

For one thing, they’re not limiting their ratings to projects that have already gone through broad technical review and public consultation, and they haven’t published any structured methodologies that I know of. Instead, they’re anointing themselves as a sort of de facto standard and putting their stamp of approval on pet projects that are, at best, promising pilots. This could lead to the kind of wildcatting and information asymmetry that George Akerlof warned about in “The Market for Lemons.” That’s a recipe for more confusion and less certainty in a market, which is the opposite of what they claim to be offering.

It wouldn’t be a problem if CarbonPlan hadn’t convinced a handful of reporters and technology companies that they’re the supreme arbiters of quality in carbon projects rather than one voice among many. The fact is they embrace the outlier views of a tiny school of thought spread across a few universities, but those views happen to resonate with a narrow community of well-meaning but deep-pocketed technologists who are acting as a vector to the broader population. In elevating CarbonPlan above the overwhelming majority of experts, these entities are magnifying the minority in a dangerous and destabilizing way.

Specifically, CarbonPlan embraces immediate adherence to pure additionally and pure removals, which I’ll try to summarize simply, based on their published opinions. Pure additionally, as their policy director seems to see it, means carbon finance shouldn’t be used to support activities that do more than just lock up carbon, on the premise that it’s hard to disentangle the carbon benefit from the other benefits. Pure removals means they believe carbon finance should only be used to pay for activities that pull carbon from the atmosphere and inject it into the ground, not those that reduce emissions. CarbonPlan also argues that nature won’t deliver permanence but that untested technologies will, despite reams of evidence on the permanence of natural systems and a dearth of evidence on untested technologies (and the fact that urgency is more important than permanence).

So, why is this a problem? After all, everyone agrees we need to end up at a state of pure removals once we’ve reduced emissions as deeply as possible. That’s the end game. It’s what the whole net-zero movement is all about.

The problem is we’re not there yet.

If we ignore reductions in the present, we’ll face impossible removals in the future, as we saw in the second installment of this series.

It’s great that technologists are pumping money into technological removals, and we should certainly encourage them to keep that work going, but CarbonPlan’s purist approach dismisses existing practices that drive emissions down now. This will take us further away from net-zero if everyone follows it.

Their additionality argument also makes little sense. First, complexity isn’t a reason to avoid something, and second, additionality gets simpler and simpler as prices rise, which they’re doing now. Indeed, there’s plenty of research showing what kinds of interventions become feasible at higher price points, which further demonstrates their additionality.

By ignoring all of these dynamics, however, CarbonPlan gives high ratings to unverified, unvalidated offsets from tech darlings like Charm Industrial while giving low marks to offsets generated under transparent but more complex methodologies that were developed through extensive technical review and public consultation.

That’s not to belittle Charm, or their geosequestration approach, or the technologists who’ve belatedly awakened to the enormity of this challenge. We need to constantly be testing new approaches, and I laud companies like Stripe that are willing to finance new ideas at the pilot phase.  It’s wrong, however, to unilaterally anoint this one as ready for prime time, especially if you’re dismissing hundreds of others that really are.

If Charm’s approach really is ready for prime time – meaning if it’s mature enough to warrant the über-high rating CarbonPlan is giving it – they should write up a methodology and submit it to one of the carbon standards. Then it can go through the wringer of peer review and public consultation, where bona fide experts can pick it apart and suggest improvements and broader stakeholders can then provide additional feedback.

I’d love to see them do that and succeed. It would be great for the world, and if they’ve secretly taken steps in that direction, I applaud them. But from what I’ve seen so far, they’ve adopted the “move fast and break things” approach that Silicon Valley loves.

Haven’t we had enough of that?

I understand that the process of developing a credible carbon methodology can be tedious, and it also means putting your ideas out there to be critiqued by experts and opportunists alike. That can be disconcerting, but these review processes evolved for reasons, as we saw in the second installment of this series.

Legitimate carbon standards don’t just provide a stamp of approval based on some media-savvy consultant’s pet theories. They provide a forum through which entities that want to produce a methodology can do so by exposing their ideas to bona fide experts in a formal process of technical review and then passing it out for public consultation and updating as new findings emerge.

Peer-review processes and public consultations are hallmarks of scientific advancement, and CarbonPlan is circumventing them with its unilateral stamps of approval.

Another case of magnifying the minority took place when a paper with the provocative title “Overstated carbon emission reductions from voluntary REDD+ projects in the Brazilian Amazon” went viral over the course of last year.

It came out in 2020 and proposed the use of a popular social impact tool to evaluate project baselines. The authors look at deforestation rates in several forested areas and create “synthetic” deforestation rates to serve as proxies for what would have happened if the projects hadn’t come into existence. It’s a process called the “synthetic control method,” which researchers have used to evaluate everything from the impact of decriminalized prostitution on public health to liberalized gun laws on violent crime. The synthetic control method is designed to isolate the effects of an “event or intervention of interest [on an] aggregate unit, such as a state or school district,” according to MIT professor Alberto Abadie, who pioneered its use.

It works not by comparing the impacted city or state to a comparable unit but to a synthetic city or state modeled from multiple states, school districts, or other population centers. Similar approaches have been used to construct baselines under some methodologies, and there may or may not be value in using it the way the authors do. Time and further review will answer that, but it may be impossible to evaluate the efficacy of so many diverse projects with such a broad, systemic approach.

Beyond this, however, the paper has a considerable shortcoming that the authors readily admit.

“The construction of our synthetic controls may not have included all relevant structural determinants of deforestation,” they wrote.

Specifically, in constructing their synthetic controls, they excluded everything unique to the human impact on individual projects from the criteria they used to identify their synthetic forests. This is equivalent to modeling the effectiveness of Jakarta’s adaptation to sea-level rise by creating synthetic controls from Chicago and Detroit.

This may have been unavoidable given the data available, and that’s one of the problems we face in all of these efforts. The authors deserve credit for trying a new approach that may still prove insightful, and most of their recommendations align with changes already being contemplated in the move from stand-alone projects to jurisdictional programs under the Verified Carbon Standard. Specifically, VCS has proposed a shift from modeling based on reference areas to risk mapping based on proximity to indicators of deforestation, such as nearness to the forest’s edge or to recent past deforestation. As you may recall from the second installment of this series, jurisdictional programs are designed to distribute risk between jurisdictions and projects, which is a different dynamic than stand-alone projects were created to address.

The paper is, in other words, one of many that could inform the process going forward, but its content doesn’t support the attention-grabbing headline (unless you buy the premise that this approach is automatically superior to existing methodologies, which even the authors don’t claim).

The problem is that too many reporters latched onto that headline while ignoring the more thought-provoking parts of the paper, not to mention the complexities it highlights or the larger debate of which it’s a part. That’s unforgivable, but it’s how the hype cycle works.

Having built market-based Natural Climate Solutions up into something they could never be, some reporters are now tearing them down instead of digging into them and trying to explain them in all their glorious complexity. To keep the narrative clean and simple, they ignore papers that support the efficacy of carbon markets, and there are plenty.

Take, for example, a 2020 paper by Rohan Best et al. They looked at 142 countries over a period of two decades and found CO2 emissions grew at slower rates in countries with carbon pricing than in countries without it. Or take previous research by Erik Haites et al. They found reductions were deeper in countries with cap-and-trade markets compared to those with carbon taxes, even though the market prices tended to be lower than the taxes – contradicting a foundational CarbonPlan dogma that high prices are what matter in carbon markets.

Haites et al also showed that cap-and-trade programs become more effective as methodologies are updated, which to me serves again to highlight the importance of constructive criticism and the destructive power of turning the process of discovery upon itself. Patrick Bayer and Michael Aklin found similar results in the European Union Emissions Trading Scheme (EU ETS), where emissions were reduced through cap-and-trade even before prices started rising – largely because low prices followed on the heels of reduced emissions, enabling the ratcheting down of caps even further.

All of these studies – and many more – paint a much healthier picture of carbon markets, but you don’t see market proponents running out and spiking the ball every time one of them comes out. Opponents like Greenpeace and CarbonPlan, on the other hand, are constantly spiking their balls, real and imagined.

That’s not a hallmark of honest inquiry. It’s a hallmark of our next trope.

Trope 4: Cherry-Picking Evidence

A related tactic, and another favorite of Greenpeace et al, is cherry-picking, or the practice of selecting only those findings that support your bias.

In efforts as complex as forest-carbon projects, there are plenty of cherries to pick in the form of community members who oppose a given project (and receive inordinate attention despite expressing clear outlier views) or parts of a project that went sideways while the overall effort succeeded. The defense, of course, is to focus on the big picture and a clear preponderance of the evidence, although that can be difficult if the cherries were cleverly picked and packaged.

For a look at systemic cherry-picking, I’ll stick with CarbonPlan and the research they submitted to ProPublica and the MIT Technology Review, which summarized their work in a piece that ran under this headline:

The Climate Solution Actually Adding Millions of Tons of CO2 Into the Atmosphere

At the time, the underlying CarbonPlan paper had only appeared on the preprint server bioRxiv, although it later appeared in the peer-reviewed journal Global Change Biology.

The paper focuses on the California Air Resources Board’s (ARB’s) methodology for Improved Forest Management (IFM), which lets project developers create baselines based on “business as usual” practices, meaning landowners can generate credits by doing more than what’s considered common practice without doing the kind of modeling I described in the second installment of this series.

The methodology arose to prevent aggressive harvesting on thousands of small family forests, hundreds of which change hands every year, and it’s designed to lock those forests up under sustainable harvesting regimes for a century. I won’t weigh in on the actual methodology other than to say it evolved for reasons that critics ignore and which are laid out in the reams of public consultation that were submitted at the time. Much of this is summarized in a court decision that resulted from a failed challenge.

In its paper, CarbonPlan zeroes in on the way projects estimate the amount of excess carbon that projects keep in trees. Specifically, CARB lets developers use the US Forest Service’s Forest Inventory and Analysis (FIA) Program, which is based on random samples of forest plots across the landscape. Unfortunately, the FIA didn’t have enough plot points to generate the degree of certainty required for carbon inventories, so CARB created “supersections” of forest that contain enough plot points to reach this.

The problem is that some of the supersections cover areas where one type of tree gives way to another type of tree, meaning that some parts will have higher carbon stocks than others, and some projects will end up getting credit for more carbon than they actually sequester. This shouldn’t happen, and there’s value in calling attention to it, but the authors ignore a remedy CARB applied (and which I don’t know enough to comment on) while implying this anomaly exists across the entire program, which it doesn’t.

This is the cherry-picking part. They zoomed in only on those areas where they knew the anomaly would show up and found that some of the projects probably did get too much credit. They also, however, found that others got too little, and then they declared the entire program a failure.

The paper has lots of other problems as well. The authors back up their claims, for example, by pointing out that an inordinate number of projects end up barely achieving the objectives needed to turn a profit, which to them means the game is rigged. This is silly, because the program is designed to achieve exactly those results.

On top of all this, they mention in passing that they were using the most recently available FIA data to critique old baselines, ignoring the fact that ARB will be updating its program to incorporate that data soon.

One of my great frustrations is that reporters ignore public consultation, which accompanies all of the incremental improvements these standards are constantly making. Some of the comments are technical and wonky, but most are accessible. These public consultations are like ready-made stories: real experts have weighed in on both sides of the issue, and their contact info is always there. Reporters and organizations interested in a better world can engage in and amplify this process, not circumvent it by bringing pet theories to a vulnerable population without providing the context they need to understand it.

That’s not how the process works, and it’s not how methodologies improve. It’s how they get blown up.

Trope 5: Believing in Conspiracy Theories

At the root of all the critiques is a belief that hundreds of biologists, foresters, economists, anthropologists, indigenous leaders, and entrepreneurs have spent 40 years conspiring to create a rigged system that exists to give Big Oil a license to pollute.

It’s the very essence of a conspiracy theory, because there’s no evidence this is the case – and plenty of evidence it isn’t.

None of this means these markets are perfect or that Big Oil is going to transition into clean energy without pressure from above and below. It means there are advantages and disadvantages to every approach, but they all fit together like the pieces of a giant jigsaw puzzle.

One advantage of well-run markets is that imperfections are pushed into the open, but that can easily become a liability if we let people exploit it to muddle public discourse instead of raising it to the level it must be if we’re to meet the climate challenge.

We can debate the role of markets all we want, in part by paying attention to the very transparent public consultations that accompany these processes, but we can’t let people who lost the debate run around with baseless claims that “the debate was rigged,” “the markets don’t work,” or “Nordhaus is a fascist.”

Above all, we can’t let a too-compliant media amplify that message. We’ve seen this script before, and it doesn’t end well.

Further Reading

Point-by-point rebuttals exist to all of the coverage I’m discussing here. You can read the rebuttal to the Greenpeace/Guardian story that standard-setting body Verra wrote, as well as the rebuttal I wrote to a ProPublica piece two years ago (and a follow-up I wrote to that one), and the correspondence with ProPublica that the California Air Resources Board (CARB) published after more questionable coverage this year, or one Permian Global Capital wrote after an especially shoddy piece in Nikkei in December. The American Carbon Registry also rebutted a Bloomberg story, but only in PDF format as far as I know.

Corrections and Clarifications

This story was updated to reflect the fact that CarbonPlan’s study on the California forest carbon offsets program was subsequently published in a peer-reviewed academic journal and to remove a reference to members of the CarbonPlan team participating in “Our Children’s Earth Foundation v. California Air Resources Board.” That reference had come from public statements by CARB, a California state agency, but CarbonPlan states that none of its employees or co-authors have ever been involved in litigation about California’s offsets program.

Opinion:
Six Lessons from the History of Natural Climate Solutions

Steve Zwick has been covering climate issues for more than 30 years, including 15 as managing editor of Ecosystem Marketplace. He currently produces the Bionic Planet podcast, and the views expressed here are his and his alone.

7 February 2022 | Once upon a time, not that long ago, environmental NGOs were utterly dependent on the generosity of others to finance their programs. It’s an arrangement that worked for some, but not for most and rarely for those engaged in activities requiring decades to reach fruition, such as ecological restoration and rural development. Some got funded, but most did not, and many of those that got off the ground ended up treading water when their short-term funding dried up.

Meanwhile, in the corporate world, a handful of companies were taking climate change seriously, and they found themselves in a related quandary.

Carpet maker Interface, for example, joined the climate challenge decades ago, and at some point, it decided to develop a line of “carbon negative” carpets.

The idea was simple: by replacing vinyl backing with something made of plants, they’d flip their production process from being a source of greenhouse gasses to one that pulls more carbon from the atmosphere than it emits. That simple idea, however, proved difficult to realize, and the company wasn’t able to bring its carbon-negative carpets to market until 2020.

Fortunately, however, they’d been able to offer carbon-neutral carpets long before then.

How?

In part by helping NGOs finance activities that reduced greenhouse gas emissions from deforestation and forest degradation while enhancing the ability of land systems to store carbon – activities that would eventually come under the rubric of “REDD+.

When Interface started offsetting its emissions, it financed activities directly, with no clear consensus on how to measure its impacts. Those early days were a wild west of sorts, with companies taking disparate approaches and sharing little in the way of lessons learned.

Over time, however, environmental standards emerged.

Drawing on the latest scientific literature and input from a broad array of stakeholders, these standards encouraged a process of scientific review, stakeholder engagement, and public consultation. This yielded detailed methodologies for everything from identifying endangered forests and quantifying human impacts to generating verified reductions and removals. Different standards had different philosophical approaches, but they built on the same science and evolved in surprisingly similar ways. Furthermore, they were designed to update over time as science and experience provided new insights.

The methodologies made it possible for companies to drive emissions down deeper and faster than they otherwise could, and many did just that. A 2016 analysis by Ecosystem Marketplace found corporations that used voluntary carbon markets tended to do so as part of a strategy to reduce overall emissions — by, for example, creating an internal price on carbon, among other things.

Then came the Great Awakening of 2019, when the world finally started taking the climate challenge seriously. Suddenly, companies that never thought of climate before started taking action – albeit with varying degrees of sincerity – and reporters found themselves struggling to understand complex mechanisms that hadn’t been taught in school.

It’s a steep learning curve, especially if you come to it fresh, but here are six things I’ve learned over the years that may at least get you pointed in the right direction.

Lesson One

Carbon markets started with natural climate solutions more than 45 years ago.

Natural Climate Solutions (NCS) date back to a seminal 1976 paper entitled “Can We Control the Carbon Dioxide in the Atmosphere?”

“The long-term response [to climate change] must be to stop burning fossil fuels and convert our industry to renewable photosynthetic fuels, nuclear fuels, geothermal heat and direct solar-energy conversion,” it said. “But a worldwide shift from fossil to non-fossil fuels could not be carried out in a few years, [and an] emergency plant-growing program would provide the necessary short-term response to hold the CO2 at bay while the shift away from fossil fuels is being implemented.”

The author of the paper was Freeman Dyson, a visionary physicist, statistician, and mathematician known as much for rock-solid breakthroughs in his core disciplines as for his more speculative ideas outside them. He had some wacky ideas that I should probably acknowledge. He believed, for example, that we could turn comets into space-borne farms, and later in life he drastically overstated the potential for Natural Climate Solutions to fix the mess.

Visionaries are like that, and there’s a bonus lesson here. Even geniuses have crackpot ideas, especially when venturing outside their core disciplines, and individual papers mean nothing if they’re not substantiated by later exploration.

Fortunately, decades of exploration have substantiated his tree-planting idea, and nature has been central to the climate challenge since 1979. That’s when the UN held its first World Climate Conference (WCC). There, delegates unanimously declared that “deforestation and changes of land use” were two of the three leading sources of man-emitted carbon dioxide. The third cause was “the burning of fossil fuels.”

That unanimous declaration also stated “that some effects on a regional and global scale may be detectable before the end of this century and become significant before the middle of the next century” and called for continued research. This spawned the Intergovernmental Panel on Climate Change (IPCC), which provides a compendium of the latest climate science in context. The IPCC’s most recent report tells us that deforestation alone still generates about 13 percent of anthropogenic emissions, while land use more broadly accounts for about 30 percent.

Around the time of the first WCC, William Nordhaus and others started to model the interplay between climate change and economic growth. Nordhaus focused on the ability of high carbon prices to drive change, while others focused on the ability of carbon markets to drive finance into the most cost-effective reductions – two approaches that critics often contend are contradictory but which I’d argue are complementary if properly implemented.

Meanwhile, in 1992, the Rio de Janeiro Earth Summit gave us the three Rio Conventions: the Convention on Biological Diversity (CBD), the United Nations Framework Convention on Climate Change (UNFCCC), and the United Nations Convention to Combat Desertification (UNCCD). All of them impact forests, and the UNFCCC called for the “conservation and enhancement, as appropriate, of sinks and reservoirs of all 11 greenhouse gasses not controlled by the Montreal Protocol, including biomass, forests and oceans as well as other terrestrial, coastal and marine ecosystems.”

The UNFCCC also brought the possibility of creating a global currency to finance change: namely, carbon credits, which work globally because greenhouse gasses have the same impact on the atmosphere no matter where they’re emitted or where they’re removed.

Interest in carbon markets has always fluctuated with climate awareness, which has in turn fluctuated with media attention. As media finally give the climate challenge the coverage it requires, markets are responding. As a result, we now see that the “high carbon price” and “most efficient abatement” approaches are not mutually exclusive. Prices for compliance offsets in the European Union are north of €90 per ton, which forces companies to reduce emissions internally, while prices for voluntary offsets are all over the place. This gives companies the ability to finance reductions and removals above and beyond what’s required by law and in ways that suit their own goals and aspirations.

To reiterate: a high compliance price is designed to force internal reductions, while low prices in the voluntary markets funnel money into the most cost-effective mitigation opportunities or next-generation technologies. The low-hanging fruit, however, is rapidly being depleted as finance moves to ever-greater challenges. Voluntary prices, in other words, are going up.

Lesson Two

Every acre of forest we save now means 50 fewer hectares we have to plant down the road, but conservation is expensive.

In 2019, an analysis in the journal Nature concluded that a hectare of deforestation pumps 355 metric tons of carbon dioxide into the air, while reforesting the same area absorbs just 6.7 metric tons per year. That means we’ll have to reforest 50 hectares for every hectare of forest we lose in a given year (or wait 50 years for that hectare to recover).

The insight is hardly new, and it’s woven into the history of Natural Climate Solutions. Take, for example, an agroforestry project called Mi Cuenca (My Basin). It was launched in 1974 by the NGO CARE to help Guatemalan farmers improve their water. It delivered clear social and environmental benefits, but it struggled to attract long-term funding.

Then, in the 1980s, an electric company called Applied Energy Services (AES) tried to offer its customers renewable energy and realized that large-scale renewables weren’t commercially viable. Undaunted, AES asked the World Resources Institute (WRI) for help.

WRI pointed AES to Mi Cuenca and helped CARE calculate the amount of carbon its activities could sequester if properly funded. AES then decided to finance Mi Cuenca based on that sequestered carbon, and the project was rechristened “Mi Bosque” (My Forest).

The real epiphany, however, came two years later, when WRI decided “to put some hard numbers into what was then a very soft debate.” It began modeling Mi Bosque’s impacts on surrounding forests and concluded that the project’s biggest climate impact came not from the new trees it had planted or the soil it had revived, but from the forests it had saved. By helping farmers increase yields, it turned out, they’d reduced their need to chop additional trees.

By all accounts, those early calculations overstated the project’s impact, but they also sparked decades of experimentation and adjustment that brought us to where we are now.

Lesson Three

Carbon methodologies have evolved through 45 years of trial, error, and adjustment.

NGOs, governments, companies, and UN agencies started building on WRI’s work almost from the start, with pilot projects across Latin America, Eastern Europe, Asia, and Africa. The goals were twofold. To promote scalability, they wanted to create standardized methodologies. To prevent greenwashing, they had to make sure those methodologies were solid.

If they succeeded, they’d be able to create a tangible asset – a verified claim on emission reductions that emitters could use to reduce their carbon footprints in the present while reducing internally for the future.

Proponents knew from the start that the process of developing such methodologies would be tedious. It would require peer review from scientific experts in disciplines as disparate as forestry and rural development, and it would require public consultation among stakeholders in forest communities.

As a result, it wasn’t until 1997 that we saw the first standardized, verified credits associated with tree planting. That’s when the Scolel’te community forestry project was certified under the Plan Vivo Standard in Chiapas, Mexico.

It took even longer for the first REDD+ units to be generated and sold. That happened in 2011, when the Kasigau Corridor REDD+ Project was certified under the Verified Carbon Standard (VCS).

The pilot projects that ran throughout the 1990s were as diverse as the terrains and types of deforestation they addressed – from “frontier deforestation” in areas where large-scale agriculture was devouring forests to “mosaic deforestation” where smallholders were being forced to cut trees for survival. The methodologies were equally diverse and complex, as reflected in scores of scientific papers published throughout the 1990s and early 2000s.

It was clear from the start that there would never be universal agreement on any methodology and that every project would have outcomes that were partly subjective. Rather than let the perfect become the enemy of the good, proponents set out to identify procedures and activities that could be verified, and that would deliver environmental benefits on the whole. Some projects would underperform, but others would overperform, and it’s what they did in aggregate that mattered.

It was also clear that stand-alone projects, which are designed to address locally-specific drivers of deforestation in areas with weak governance, would face a different dynamic than would the next generation of projects embedded in jurisdictional programs, which would be designed to drive systemic change. More on this in a bit.

In 2007, Winrock International asked some of the world’s leading deforestation experts to summarize the current thinking on stand-alone projects in a paper entitled “Mitigation and Adaptation Strategies for Global Change.” Since then, the process of creating methodologies and related projects has tended to unfold along these lines:

To create a carbon methodology, some entity will identify a challenge that isn’t currently being addressed, such as the inability of smallholders to defend their land from illegal loggers. They will then develop a stepwise approach to addressing it and present it to a standard-setting body. The proposal will then go through a series of expert reviews, where it is amended before being put out for public consultation. At that point, stakeholders will have a month or two to make comments, and then the procedure may be amended further before finally being adopted as a recognized methodology.

Once a methodology exists, a project developer can follow it to create a project design document (PDD), which is a detailed explanation of the specific challenge and how the project hopes to address it. A recognized third-party auditor must then validate the project design to ensure its legitimacy. If the design is approved, the proponent will develop the project, which another third-party auditor must then verify to ensure it has been properly implemented. Only then can credits be issued.

It’s obviously more complicated than this, and I’ve explained the process in more detail here, while Tanya Dimitrova has done so here. Several leading NGOs did so here, and the public-private BioCarbon Fund did so here.

As a result of all this, large-scale conservation efforts that previously struggled to make ends meet have managed to scale up, and not by relying on goodwill alone. They’re scaling up by delivering verified ecological benefits which are, in turn, adjusted to reflect scientific uncertainty.

Over the past decade, research has shown a simpler way of projecting short-term deforestation by looking at fewer variables, and the process is evolving dramatically as the lessons from the last decade are incorporated into new approaches and the world shifts from stand-along projects to jurisdictional programs. As more people and resources enter the space, it will be possible to construct simpler reference levels with more third-party input rather than just oversight.

Lesson Four

REDD+ is just one component in a global mosaic of interconnected solutions, none of which can meet the climate challenge on their own.

REDD+ won’t magically fix the climate mess alone, but nothing will. Instead, it dovetails with government policies, private-sector initiatives, and NGO-driven solutions. The Forest Stewardship Council (FSC), for example, emerged in the wake of the 1992 Rio Earth Summit – not to replace government policy, but to compensate for its failure. The FSC develops standards for certifying sustainably sourced timber, and it works by stimulating demand for sustainably harvested timber products. Getting certified is expensive, and REDD+ is emerging as a tool for jump-starting that process.

Another initiative emerged in 2004, when NGOs and corporates launched the Roundtable on Sustainable Palm Oil (RSPO) to promote the use of sustainably produced palm oil. This was followed in 2006 by the Round Table on Responsible Soy (RTRS). In each case, the criteria were squishy at first, and consumer demand was slow to materialize.

Things are improving on both fronts, but for our purposes the important thing is that the extra cost of producing certified product outweighs the market premium, and REDD+ is emerging as a tool for bridging this financing gap.

Meanwhile, as consumer awareness grows, so do corporate initiatives. In 2010, for example, 400 private companies passed a resolution via the Consumer Goods Forum (CGF) to purge deforestation from the supply chains of cattle, soy, oil palm and pulp & paper. Then, in 2014, UN General Secretary Ban Ki Moon launched the New York Declaration on Forests, which is a cluster of ten pledges designed to end deforestation by 2030 while restoring hundreds of millions of acres of degraded land.

These efforts work on the demand side of supply chains, and while they haven’t ended deforestation, they have led to a major restructuring of corporate supply chains. REDD+ provides targeted funding to scale these initiatives up, and the transparency they bring can provide leverage points for government regulation.

Lesson Five

The move from projects to jurisdictional programs was planned from the start.

Many countries are implementing jurisdictional REDD+ programs, or programs that cover an entire country or state, instead of the smaller areas that stand-alone projects focus on. This is not, as the Guardian and others claim, a response to news coverage of project shortcomings. Instead, it’s baked into the evolutionary process and has been for well over a decade.

The UNFCCC focuses on jurisdictional REDD+, but negotiators recognized early on that it would take years for countries to agree on international protocols and still longer to develop the monitoring and management systems needed to implement them. To promote early action, the Paraguayan delegation proposed a “nested approach” in 2008. This made it possible for countries to start with isolated projects that would eventually be absorbed into jurisdictional systems within countries that chose to pursue them.

From the start, it was clear that stand-alone projects are different from projects that nest in jurisdictional programs – largely because stand-alone projects address site-specific drivers of deforestation in areas where weak jurisdictional oversight is treated as a separate issue, while projects that nest in jurisdictional programs are designed to encourage systemic improvement by sharing risk between projects and jurisdictions. For this reason, the baselines of nested projects will probably be lower than for stand-alone projects, as Simeon Tegel pointed out in 2010.

“The risk is that these projects could be punished for their early success through discrepancies with an eventual national REDD methodology,” he wrote in Ecosystem Marketplace.

This reality is finally upon us, albeit a decade later than expected, and it’s sure to provide a jolt. Projects will complain about more conservative baselines, and critics will claim the whole system needs to be abandoned. This, however, is how evolution works. Stand-alone baselines come from a time when projects were doing all the heavy lifting on their own and the data was scarce, while nested baselines come from a time when the jurisdictions are supposed to be helping them and more data is available. At the same time, the methodologies for establishing baselines in stand-alone projects are cumbersome and complex, while those for nested projects are streamlined and simple. As I see it, we’re stepping sideways in order to get a better footing for the future. It’s something we have to do, but that sideways step could be disastrous if we land on mushy ground. That’s why it’s important to get a critical mass of minds engaged in doing it right. For the sake of encouraging future development, it will also be necessary to recognize existing projects that were created in good faith, and there will certainly be a contentious period of adjustment.

But I digress.

When negotiators failed to reach a global agreement at the 2009 Copenhagen climate talks, governments and NGOs encouraged a proliferation of stand-alone projects and subnational initiatives to promote early action.

At the same time, donor countries such as Norway, Germany, and the United States continued offering “results-based” payments to jurisdictions that were able to document reductions in emissions from deforestation. These payments are different from offsets in that they do not involve the creation of a carbon asset. As a result, the accounting is less rigorous than that required for offset-quality payments.

Many projects began as cash-strapped conservation efforts that were struggling to cover costs, while some indigenous projects began as unfunded Life Plans, which are indigenous management strategies designed to revive traditional agricultural practices. Over time, the projects and methodologies became more sophisticated while global climate talks ground on.

At the 2013 climate talks in Warsaw, negotiators signed off on the Warsaw Framework for REDD+. Under the framework, countries that want to receive jurisdictional REDD+ funding must first calculate a Forest Reference Emissions Level (FREL), which is an estimate of future emissions from deforestation. Countries then submit their FREL to the UNFCCC, which provides a technical assessment but neither accepts nor rejects it.

As the Paris Agreement takes effect, a country’s FREL will serve as a pie from forestry-based emission reductions, including those associated with carbon projects, are sliced.

Although a FREL isn’t a baseline in itself, it can serve as the basis of one.

The upshot is that the methods of identifying priority areas within a jurisdictional system are different from those used to develop baselines for stand-alone projects. They focus, for example, on geospatial indicators such as proximity to recent past deforestation instead of intricate, site-specific modeling.

The challenge now is aligning these two systems without losing projects that have already delivered ecological results.

Lesson Six

Ideologues of all stripes believe their TRUTH trumps anyone else’s facts.

In the early 1990s, the science underpinning carbon finance was untested, while the uncertainties were unknown, and the methodologies were non-existent. But the science improved, the uncertainties came into focus, and the methodologies came into being. As evidence mounted, opposition to market-based NCS waned, but a small yet vocal contingent of NGOs remained opposed.

In 2001, biologist Philip Fearnside, then with Brazil’s National Institute of Amazonian Research, analyzed the disparate views and found that opposition to including forests in the Kyoto Protocol’s Clean Development Mechanism (CDM) came almost exclusively from a small cluster of European NGOs or their affiliates in developing countries, while support for including forests in the CDM came from NGOs based in the United States or in countries facing deforestation loss – primarily Brazil.

“The reasons for these differences are not scientific, despite the debate frequently being couched in scientific terms,” he wrote. “It is very important to distinguish between what is a scientific conclusion and what is a moral judgment.”

This doesn’t mean forest-carbon methodologies have evolved to a state of perfection, and Fearnside hasn’t been shy about criticizing shortcomings when he sees them, but it shows how long this ideological rift has existed.

In the next installment, I’ll provide a framework for differentiating legitimate critiques from ideological bias and science denial.

Opinion:
Will Coverage of Climate Solutions Suffer the Same Fate as Coverage of Climate Science?

Steve Zwick has been covering climate issues for more than 30 years, including 15 as managing editor of Ecosystem Marketplace. He currently produces the Bionic Planet podcast, and the views expressed here are his and his alone.

1 February 2022 | Early last year, the Guardian published a story under the following headline:

Research findings that are probably wrong cited far more than robust ones, study finds

The story focused on the work of two behavioral psychologists who’d examined reams of research and concluded that bright, shiny bunk is 100 times more likely to be cited than is bland, boring truth – a ratio that triples in social sciences.

The science editor who wrote the piece dutifully reminds us that the finding “is itself not exempt from the need for scrutiny” but that, historically, “the more dramatic the results, the more likely they are to be wrong.”

Unfortunately, the piece came too late for the Guardian’s environmental team, which had already published a dramatic piece under this headline:

Carbon offsets used by major airlines based on flawed system, warn experts

The Guardian produced that story together with Greenpeace’s Unearthed unit and a nonprofit called SourceMaterial, all of which claimed to have uncovered hidden flaws in the ways carbon markets support forests – flaws that hundreds of scientists had failed to identify over 45 years of research but that a handful of intrepid reporters uncovered in a matter of months.

It’s a compelling narrative, but like those dramatic findings above, it’s also wrong – not because the system is perfect (it isn’t), but because the narrative assumes a perfect solution exists, while the”flawed” system assumes imaginary perfection is the enemy of the good.

Specifically, the system provides a framework within which the best available solutions are implemented while their imperfections are pushed into the light. It supports early action and promotes evolutionary improvement within a mosaic of solutions that the simplistic narrative above not only ignores but undermines.

Nature-based carbon markets have evolved to fill gaps in the broader response to the climate challenge, and those markets adapt as the gaps shift and new solutions emerge. The first generation of nature-based carbon markets, for example, have often served a first responder function to protect the world’s most ecologically valuable and vulnerable forests. As new approaches emerge, however, they’re shifting to a broader approach that was planned from the start but impossible to implement until recently. By ignoring this context, some reporters are generating simple but deceptive narratives that echo the sloppy coverage of climate science that got us into this mess.

Naomi Oreskes and Erik Conway documented that coverage in 2010’s “The Merchants of Doubt.” They showed how a “loose-knit group of high-level scientists” driven by “the ideology of free-market fundamentalism” and “aided by a too-compliant media” (emphasis mine) turned the process of scientific discovery against itself to undermine trust in climate science and create a muddled public discourse.

Specifically, as the scientific consensus coalesced throughout the 1980s and 1990s, right-wing ideologues, many funded by ExxonMobil and Koch Industries, plucked outlier voices from choirs of debate, stripped them of their context, and framed honest inquiry as proof of something nefarious. In their narrative, bright shiny charlatans became brave prophets of revealed truth, standing up to an incestuous cabal of eggheads and bureaucrats. Conservative-minded reporters ate it up, and legitimate publications followed suit, drawing more and more outlets into the narrative until “a wide spectrum of the media…felt obligated to treat these issues as scientific controversies.” The result was a decades-long delay on climate action.

Something similar is happening in coverage of market-based Natural Climate Solutions (NCS), with decades-old ideological disputes being framed as newly-unearthed findings and legitimate areas of debate being framed as evidence of something dark and nefarious. This time, it’s not free-market fundamentalists who are contaminating public discourse but others, including ideologues from the opposite end of the spectrum: those who see the market economy as the root of all evil and carbon offsets as a tool for perpetuating that evil. In their view, markets got us into this mess and markets can never get us out.

“One must question the motive for this ongoing reliance on market-based mechanisms, the very system that has led humanity to what is now a point of systems collapse,” wrote Greenpeace last year.

“The environment, and the cultures living in harmony with it, should be the basis for human development and societies; not an item of the market economy,” declared Barzilian NGO CIMI.

I’m no free-market fundamentalist, and I’m even sympathetic to some of these views, but no one’s allowed to support their arguments with findings that are cherry-picked, decontextualized, and distorted.

If the Guardian/Greenpeace/SourceMaterial stories reveal anything, it’s that the climate challenge isn’t a puzzle book with an answer key in the back; it’s a wicked problem that makes COVID-19 look like grammar school arithmetic. As in medical treatments, climate solutions are based on probabilities instead of certainties. They are, by necessity, implemented with incomplete information, and they often work in tandem with other treatments. What’s more, their efficacy is measured against viable alternatives, and not against pet theories, miracle cures, or imagined states of perfection.

But the outlets above tell us to do exactly that with market-based NCS, encouraging us to jettison imperfect solutions that improve over time while endorsing the equivalent of magic bullets and mythical elixirs.

And idealogues aren’t the only ones putting narrative over substance. In the past year, ProPublica and the MIT Technology Review have produced similar content, as have Bloomberg, National Public Radio (NPR), and a handful of others. None of them are making stuff up, but they all present an incomplete and dangerously misleading narrative at a time when the public needs context.

My goal with this series is to provide that context – and not, as it may first appear, to convince you that carbon markets are perfect.

Instead, I hope to put these markets into perspective by showing how they evolved to their current state, how they’re continuing to evolve, and how that evolution addresses uncertainty. I won’t go into deep detail on specific methodologies, but I will provide links to pieces I and others have written. I’ll also try to offer some insight into how market solutions fit into the Jenga tower of interlocking climate solutions, and why the sum is greater than the parts.

I’m offering a broad sweep, and I apologize for not offering point-by-point rebuttals to specific articles. Those do exist. Standard-setting body Verra published this rebuttal to the Greenpeace/Guardian story, while I wrote two rebuttals to a ProPublica piece two years ago — one here and another here. The California Air Resources Board (CARB) published its correspondence with ProPublica after questionable coverage last year, and the American Carbon Registry rebutted a Bloomberg story as well, although it’s not online as far as I can tell.

If I do my job right, those rebuttals will make more sense when you finish this series than they do now, and you’ll be able to distinguish the sensationalist coverage I’m critiquing from the workhorse coverage that comprises the bulk of what’s out there. For me, this is the story of a system that’s managed to emerge imperfect but intact despite decades of neglect from the larger world. Now that the world has awakened to the enormity of the climate challenge, these markets can help accelerate our efforts to meet it, but only if a critical mass of people understand how they work and what their limited role is.

In this installment, I’ll offer my take on how media can run amok in covering complex issues like climate change, with or without ideological bias, and in part two I’ll offer a brief history of Natural Climate Solutions. In part three I’ll introduce a framework for identifying science denial and see how this coverage fits into it.

I cover a lot of territory here, and while I’ve checked a few things with friends, there’s been no formal review. This series isn’t the final word on anything, but rather the opening words to what I hope is a deeper exploration on your part, and it’s opinion, not reportage (although the opinions come from decades of reporting).

Before diving in, however, I’ll offer a brief look at what I see as the fundamental misunderstanding that fuels all muddled coverage of carbon markets.

The Great Conflation: Offsets and Internal Reductions

Most of the people who get carbon markets wrong start out by conflating two fundamentally different questions:

  1. Will companies use carbon markets to avoid the deep restructuring needed to meet the climate challenge?
  2. Do carbon markets work?

(A corollary question, which I don’t have space for here, relates to whether we should emphasize reductions or removals. I address that false dichotomy in Episode 69 of the Bionic Planet podcast.)

To the first question: some companies may think they can buy their way out of reducing emissions, but they’ll soon be disabused of that delusion – in part because the price of quality offsets will rise, but also because emerging protocols for what does and doesn’t constitute carbon neutrality emphasize internal reductions. Even if the size of the voluntary carbon market increases 15-fold, as the Taskforce on Scaling Voluntary Carbon Markets (TSVCM) argues it must, there won’t be enough offsets to decarbonize the global economy. These markets exist to accelerate decarbonization, not replace it. (For details, see “Debunked: Eight Myths About Carbon Offsetting“).

To the second question: yes, carbon markets work, but they don’t always work the way people think they do, and their impact can be subjective. This especially applies to projects that reduce emissions by financing Natural Climate Solutions (NCS), an umbrella term for a broad array of interventions that slow climate change by improving the way we manage forests, farms, and oceans. These involve science-based methodologies that incorporate varying degrees of certainty and uncertainty into their accounting. This ensures environmental integrity, but it also makes the methodologies hard to communicate and easy to distort.

In my view, most of the people trying to undermine trust in market-based NCS are doing so because they don’t trust the answer to the first question – or in some cases because they think we should use markets to punish oil companies instead of finance cost-effective mitigation. There is an argument for a high carbon price to drive change, which I’ll explore later, and I’ve also argued that we should hold purveyors of science-denial accountable for their lies, but that’s a different issue.

Many of those criticizing market-based NCS argue that fossil-fuel emissions should only be offset through industrial Carbon Capture and Storage (CCS), which pulls carbon dioxide from the atmosphere. CCS includes machines that have meters on them, which theoretically makes for simpler accounting than you get in NCS. I see the argument, and it’s a legitimate debate – one where reasonable people can disagree – but it’s not an either/or situation. It’s a how much of each situation.

I see the mechanisms I’m exploring in this series as dominoes that we’ve been lining up for 45 years, waiting for the world to finally awaken to the enormity of the challenge. With that awakening, we can tip those dominoes to trigger a global restoration of nature, and we can do it fast, but only if a critical mass of people see how this all fits together.

Bottom line: if people want to argue that certain industries should only be allowed to use certain types of offsets, that’s their prerogative. But if they lose that argument, they can’t go trying to discredit market-based NCS with cherry-picked findings and outlier opinions that run contrary to a preponderance of the evidence.

Why we need Natural Climate Solutions

Natural Climate Solutions address some of the most vexing components of the climate challenge. Deforestation, for example, generates 13 percent of the greenhouse gas emissions associated with human activity, and it’s the epitome of a wicked problem, with multiple underlying drivers and no perfect solution.

NCS, as we’ll see, can get us roughly a third of the way to meeting the Paris Agreement’s 1.5-degree C target, but they were garnering just 1 percent of climate-related media coverage until 2018. This changed after a seminal paper called, appropriately enough, “Natural Climate Solutions” put NCS on the map.

 

Climate mitigation potential of 20 natural pathways. We estimate maximum climate mitigation potential with safeguards for reference year 2030. Light gray portions of bars represent cost-effective mitigation levels assuming a global ambition to hold warming to <2 °C (<100 USD MgCO2e−1 y−1). Dark gray portions of bars indicate low cost (<10 USD MgCO2e−1 y−1) portions of <2 °C levels. Wider error bars indicate empirical estimates of 95% confidence intervals, while narrower error bars indicate estimates derived from expert elicitation. Ecosystem service benefits linked with each pathway are indicated by colored bars for biodiversity, water (filtration and flood control), soil (enrichment), and air (filtration). Asterisks indicate truncated error bars. Source: “Natural Climate Solutions

 

Coverage of Natural Climate Solutions

Media now cover NCS, but it’s sometimes a blend of exuberant, unexamined support for nature and condescending dismissal of the financing mechanisms that enable it. In 2019, for example, the Guardian was among several papers gushing over the “mind-blowing potential” of “tree planting” to slow climate change.

That’s a problem, but not because tree-planting can’t help meet the climate challenge.

It can, and it must.

The problem is that all the stories overstated the solution by making claims that are impossible if you do the math while presenting 50-year-old solutions as new and revolutionary ideas. This distracted from a half-century of methodological progress. Any one of those could have provided opening hooks into a deeper exploration of these methodologies, but few did. On top of this, the flurry came a few months after Ecosystem Marketplace published the 2019 “State of Voluntary Carbon Markets” report, wherein experts listed such naively positive coverage as one of the more dangerous developments of 2018.

Why?

Because, they feared, naïve coverage would promote naïve demand, and this would encourage fly-by-night tree-planting schemes and embolden “carbon cowboys” – a euphemism for shady operators who claim to offer carbon credits but ignore recognized standards and eschew third-party oversight.

As feared, dubious tree-planting projects did proliferate, but so, thankfully, did critical coverage of these operations.

Then the Guardian teamed up with Greenpeace to “investigate” NCS programs operating under methodologies that had evolved over decades of peer review and public consultation, and that’s where it gets weird.

Within NCS, they focused on a cluster of mechanisms and interventions called “REDD+” (Reducing Emissions from Deforestation and forest Degradation, plus fostering conservation, sustainable management of forests, and enhancement of forest carbon stocks in developing countries). The term itself is enough to put people to sleep, but it describes an effective yet complex and interdependent array of financing mechanisms that are being used to counter deforestation, albeit not yet at the scale needed and not yet in a way that’s fully integrated into government policies.

Unlike simple tree-planting schemes, which offer nothing in the way of accountability, verified carbon projects follow detailed methodologies that were developed through a public process of peer review and response. Each project, as a result, has its own prepared documentation that describes the design of the carbon credit project (known as project design documents, project description templates, and other terms), that lay out the rationale for the project’s climate benefits as well as the probabilities of the project succeeding (or failing) and the risk management strategies to be undertaken based on those probabilities. This transparency is their greatest strength, but it also makes them vulnerable to cherry-picking and distortion.

Uncertainties are inevitable in carbon finance, as they are in weather forecasting and climate modeling; but while individual projections are uncertain, hundreds will average out to something predictable.  Forest carbon project developers use uncertainty levels to adjust the number of credits coming from their projects and buffer pools to provide insurance against reversals from events like forest fires or incursions. Independent, third-party project validators check these uncertainty levels, and the methodologies underpinning these projects are updated as the science improves. What matters to the system is whether the risk adjustments, insurance pools, and buffers prescribed in the rules and methodologies make up for the uncertainty.

Carbon standards are in the midst of major updates right now, with new methodologies out for public consultation and new criteria for verifiers and validators, as well as new training regimes. These updates began years ago and are not, as the Guardian has implied, a response to their reporting. They’re part of the evolutionary process, as are new treatments for COVID-19 and other diseases. Improvements don’t invalidate the earlier generation of treatments, but turning the process of improvement upon itself can do a lot of damage.

Bugs in the System: Our Brains on Science

Every journalist I know agrees we blew it on climate change, and for reasons Columbia Journalism Review editor Kyle Pope elucidated in 2020:

Journalism has always been good at fast. The home team won. An old woman was shot. A president was elected. The quicker a story moves, the more compressed the drama, the better we are at reporting it.

Slow is harder. Stories that contain subtlety, that evolve, that don’t have an ending – those aren’t our strength. Racism, systemic poverty, the long-term effects of outdated policy – these are subjects that we’ve consistently failed to get our arms around. We chase the immediate, the ephemeral, and ignore the seismic, the fundamental.

If you think things were better in the golden days of journalism, check out what New York Sun editor John Bogart said more than a century earlier.

“When a dog bites a man, that is not news, because it happens so often,” he said. “But if a man bites a dog, that is news.”

This is less a media failure than a bug in the human psyche. We’re drawn to novelty and clear story arcs because they’re how we learn and assimilate information. The problems come when novelty distracts us from boring reality, or when the clear arc is a false narrative.

In academia, they talk of “publication bias,” which means studies that confirm the consensus rarely get published. Scottish psychologist Stuart Ritchie recently bemoaned this phenomenon.

“Scientists [are] dependent on grants to support their research and work in an atmosphere that favors showy and ostentatious findings over workhorse studies that only add small pieces to our knowledge,” he wrote.

Marta Serra-Garcia and Uri Gneezy, who wrote the study I opened with, pointed out that such ostentation contaminates public discourse because “these [wrong] studies are also more likely to receive media coverage and become famous.”

And once they’re famous, they’re dangerous – especially when they get hard-wired into our political brains. Once that happens, they become “zombie ideas,” which Paul Krugman defines as “ideas that should have been killed by contrary evidence, but instead keep shambling along, eating people’s brains.”

Viral Bunk and the Hype Cycle

Nobel laureate Robert Shiller likened the spread of bad ideas to pandemics that erupt when viruses move from a population with high immunity (the experts of academia) to one with low immunity (us) via a vector (media) that converts them into something easily absorbed into the prevailing narrative, spawning a “contagion of oversimplified and easily transmitted variants.”

Former science reporter Ryan Mandelbaum wrote how this phenomenon plays out in bad science reporting:

It’s really not that hard to write a science news story, I promise. Some new scientific results come out, you talk to a scientist on the phone and ask them what they did, then you ask a few other people who know about the research if the results made sense. It’s a lot like, well, any other reporting.

But there’s just something about science news that makes people really, really bad at covering it. Reporters blow single papers out of proportion, publish their own assumptions that the research doesn’t actually support, or plop a super-speculative headline on top of preliminary results. Then there’s the hype cycle, where writers might opt to cover overblown, one-sided university press releases instead of the actual science.

Vox science reporter Brian Resnick wrote about the hype cycle in 2019, when he showed how an academic study on the behavior of lonely investors spawned a flurry of news stories on the perils of urban living. This viral variant emerged as the research passed from a population with high immunity (the academic world) to a vulnerable population (reporters) via a vector (the university’s press department) that had inadvertently caused a mutation in the message.

“Many journalists just follow the lead of press releases,” Wrote Resnick. “If we can’t evaluate the claims of press releases, how can we evaluate the merits of studies (which aren’t immune to shoddy methods and overhyped findings themselves)?”

As he was publishing his piece, a new hype cycle was emerging: the one in Natural Climate Solutions.

As I mentioned earlier, the term Natural Climate Solutions entered the vernacular in a 2017 paper that examined a range of interventions – from planting trees to improving fertilizer management to revitalizing soil – that can be leveraged to meet the climate challenge. The hype cycle, however, began later, when a far less rigorous paper overstated both the potential and the revolutionary nature of NCS. It provided, in other words, exactly the kind of oversimplified variant that goes viral. This is the paper the Guardian gushed over above, and they were far from alone.

To be fair, prominent climate leaders did reference the paper to amplify understanding of NCS, so a reporter on deadline can be forgiven for running with it, but a simple Google search would have led them to the full story. The fact is that afforestation/reforestation (tree planting) was already a mature mitigation approach, and it was underpinned by carbon market methodologies which, as we’ll see in the next installment, had evolved through a long and transparent process of stakeholder review. REDD+ was also mature then, and it includes afforestation/reforestation.

When the hype cycle turned to these mature approaches, the transparency that’s core to their constant improvement became a patch of raw cherries to be picked and offered, context-free, to a newly-woke public hungry for fully-baked pies. Partly as a result, the mood shifted from blind infatuation to abject scorn – with little effort to first understand, let alone explain, the dynamics.

The great tragedy in all of this is that we need informed skepticism from diverse stakeholders. That’s what drives the whole process forward. Both REDD+ and the larger suite of natural climate solutions have evolved substantially over the past 30 years, and they’ve evolved explicitly because healthy critiques drive evolutionary improvement.

But the pieces I’m addressing don’t offer healthy critique. They offer sensationalist headlines highlighting issues that either no longer exist, never existed, or are known limitations in workhorse mechanisms that are functioning in their own little way but being whipped and beaten for not managing to pull the entire load on their own. Infuriatingly, many of those doing the whipping and beating have also done the most prancing and the least pulling.

In part two, I’ll offer a brief history of REDD+ before segueing into a more focused summary of the parallels between bad science reporting and outright science denial.

Looking Back on COP 26 and the Emerging Role of Indigenous People and Carbon Markets

17 December 2021 | Brazilian indigenous leader Francisca Arara bristles when Westerners tell her that forest people should oppose carbon markets.

“We know what we offer the world, and we know what kind of resources we require to deliver it,” she said at year-end climate talks (COP26) in Glasgow, Scotland.

The talks made history both for the massive indigenous presence, which included 28 indigenous representatives engaged directly in the talks and hundreds of others representing their people informally. It closed with the adoption of the Glasgow Pact, which formally recognized “the important role of civil society, including youth and indigenous peoples, in addressing and responding to climate change, and highlighting the urgent need for action”.

For Arara, carbon markets are a way of empowering Indigenous People by paying them for protecting the world’s forests.

“Indigenous People don’t want to be under anyone’s umbrella, regardless of whether they’re in the government or the private sector,” she said. “Markets can deliver the resources we need and the autonomy to utilize them, but only if they’re done right.”

Several traditional and indigenous communities have already engaged carbon markets, but many more are either skeptical of their value or unsure how to engage.

California’s Yurok people, for example, used carbon markets to save their forests and expand their territories, and Indigenous People across Latin America have leveraged carbon markets to solidify their land rights. Non-indigenous forest people, like the Afro-Colombian people of the Tolo River, have used carbon finance to implement sustainable cattle farming, while traditional people across Africa have used carbon markets to both secure their tenure and implement sustainable land-management strategies.

Some NGOs oppose indigenous involvement in carbon markets because, they say, the market economy taints indigenous culture, but prominent indigenous leaders have taken a more pragmatic approach.

“When we hear about carbon markets, it’s not always clear what proponents expect from Indigenous People,” said Chadian indigenous leader Hindou Ibrahim in Glasgow. “If you think you can just show up with money and tell us what to do, that won’t work, but if you start by asking us how we can engage as partners, then we can talk.”

Unfortunately for most Indigenous People, carbon markets that finance the protection of endangered forests (REDD+) are often out of reach – due, ironically, to rules created to ensure environmental integrity. Specifically, at the project level, REDD+ payments can only flow to forests that pass “additionality” tests showing the forests are at high risk of being lost without the payments.

This works against Indigenous People, because they tend to protect forests even at great cost to themselves and with no compensation from the rest of us. Indeed, Carbon Market Watch recently accused an indigenous project in Colombia of overstating its baseline, or the probability of loss, because “indigenous management of the land is generally associated with lower deforestation threats” than was the neighboring land.

The tragic irony isn’t lost on Arara.

“Those who pollute the most and destroy the forest end up making the most money,” she said. “Meanwhile, those of us who preserve the forest barely see a penny for the work we do.”

She represents the Arara nation in the Governors’ Climate and Forests Taskforce (GCF Taskforce), a global alliance of states, provinces, and indigenous territories working to slow climate change by saving forests. She also heads the indigenous caucus within the GCF Taskforce, and she came to Glasgow to support the launch of another alliance: the Peoples Forests Partnership (PFP), which unites indigenous organizations, NGOs, and green businesses.

The PFP promotes direct carbon payments to indigenous communities but is agnostic on the source of those payments. They can come from markets, governments, or other sources, but they have to come in support of time-tested indigenous land management practices, and they must flow directly to indigenous organizations, with the goal of delivering $20 billion annually by 2030.

Antoinette Royo, Executive Director of the International Land and Forest Tenure Facility, sees the  Glasgow Leaders’ Declaration on Forests and Land Use as an opportunity for indigenous organizations to stand up for themselves by demanding control over $1.7 billion that the United States, United Kingdom, Germany, Norway and the Netherlands have committed to supporting indigenous forest management.

“Indigenous Peoples and local communities need to receive this directly,” she said. “But the reality is that just 1 percent of climate finance goes to Indigenous Peoples.”

Long Time Coming

Although the PFP launched in Glasgow, it’s built on concepts that indigenous leaders of the Amazon have been advocating for more than a decade, beginning with the Peruvian indigenous organization AIDESEP (Interethnic Association for the Development of the Peruvian Rainforest).

AIDESEP is an umbrella organization of 109 indigenous federations representing 1,800 indigenous communities, and in 2010 they initiated a program called REDD+ Indigena Amazonico (Amazon Indigenous REDD+, or “RIA”).

RIA aimed to promote  REDD+ based on indigenous Life Plans (Planos de Vida), or indigenous land-management strategies.

Life Plans originated in Colombia in 1992, and they typically identify and map important hunting and harvesting areas, sacred historical and ceremonial sites, and of course, forested areas categorized by the quality of cover and species.

RIA gained support across the Amazon when Shuar leader Juan-Carlos Jintiach championed it as head of COICA (Coordinator of the Indigenous Organizations of the Amazon Basin), which coordinates the activities of nine national indigenous organizations, including AIDESEP.

“It was obvious from the start that additionality was going to work against Indigenous People,” said Jintiach. “I understand why additionality exists, but ironically it only works for us if we give up our dedication to the forest, which is not what we want to do.”

By the 2014 climate talks in Lima, other indigenous leaders had begun pressing the point. Fermín Chimantani, then serving as co-president of Peru’s Amaracaeri Reserve, presented his people’s Life Plan there and passionately argued that carbon finance should flow to his people based on these activities, rather than on standards imposed from outside.

“I’ve been working on our Life Plan since the 1990s,” he said. “We’ve created governance structures; we’ve valued our ecosystem services such as water filtration, biodiversity conservation, and evapotranspiration, and we’ve shown that we can use our indigenous vision to save and manage our forest.”

Point-by-point, he argued that by following their Life Plan, his people were already achieving what top-tier REDD projects aspired to: they had empowered women, they had restored degraded habitat for endangered species, and they had created livelihoods built on sustainable agricultural activities that led to a healthier forest community — and, therefore, a healthier forest. What they lacked was the seed funding to fully implement their plans.

Seven years on, most Indigenous People of the Amazon are still facing the same challenge.

“You could argue that Indigenous People are self-sufficient if we have a territory, and that’s true in terms of food and water,” said Harol Rincon Ipuchima, General Secretary of the Organization of Indigenous Peoples of the Colombian Amazon (OPIAC). “But it’s not true if we’re to continue combatting illegal logging, illegal mining, and illegal encroachment, or to participate in the cash economy with sustainable agriculture, including fish farming and non-timber forest products.”

He, like Jintiach and Chimantani before him, argues that Life Plans should form the basis of carbon payments because they represent forest management programs that are preventing forest loss.

It’s a concept that seemed to be gaining momentum after the 2015 Paris Climate Talks, in part because jurisdictional approaches to REDD+ made it possible for state and federal governments to spread carbon finance based on activities they felt would do the most good for forests within their jurisdictions – instead of codified additionality tests.

Over the past year, two developments took the wind out of this approach. First, Peru agreed to base its national forest reference level on historical deforestation rates instead of trends within its jurisdiction. The Peruvian government argued the shift was necessary to attract international finance, but it put a definitive cap on REDD+ finance flowing into the country. At the same time, emerging risk allocation mechanisms, drawing on new research, started prioritizing areas near recent past deforestation – another blow to indigenous territories.

Three Peruvian indigenous organizations – AIDESEP, the Confederation of Amazonian Nationalities of Peru (CONAP), and the National Association of Administration Contract Executors (ANECAP) – cried foul, and the Peruvian government says its exploring new tools for financing the maintenance of standing forests

Proponents of the PFP say they may already have one.

New Financing Mechanisms

Mike Korchinsky founded wildlife conservation company Wildlife Works more than 25 years ago, and he says corporates may now be willing to support forest maintenance in ways they weren’t back then.

Wildlife Works is one of several organizations facilitating the PFP – together with Ecosystem Marketplace publisher Forest Trends, the Center for People and Forests (RECOFTC), Everland, and Greencollar.

In Glasgow, Korchinsky said new technologies and practices make it possible to model the impact that Life Plans have on both carbon stocks and biodiversity. He plans to submit a draft methodology to standard-setting body Verra for public consultation soon, but said the idea isn’t to generate offsets.

“The idea is to quantify the impact of their activities on the forest in a verifiable way and then to see if companies will pay for it,” he said.

“This wouldn’t be an offset because we want to move beyond the model of preventing loss and towards the model of supporting maintenance,” he added. “It’s the kind of thing no one would have paid for 20 years ago, but times have changed, and we won’t know if they’ll pay until we try.”

Direct International Funding

While project-based funding can and does flow directly to indigenous organizations, intergovernmental funding has always been elusive, as Jintiach pointed out in 2015.

“We’ll find ourselves talking to governments directly and asking them why they always have these bilateral government-to-government discussions, and then we’ll see $100 million change hands, and we’ll say, ‘What’s that for?’, and they’ll say, ‘That’s for indigenous people,’” he told Ecosystem Marketplace then.

The problem persists, and many indigenous leaders attribute it to a paternalistic attitude from governments, NGOs, and even reporters.

“A journalist once asked me if we had the capacity to actually govern ourselves,” said Wrays Perez, Social Technical Coordinator of the Autonomous Territorial Government of Wampís Nation (GTANW).

“I answered: ‘Why shouldn’t we have this capacity? We’ve been doing it for thousands of years.’”

A New Indigenous Fund

Gustavo Sanchez, President of the Red Mexicana de Organizaciones Forestales Campesinas (Red MOCAF), pointed out that the Measoamerican Alliance of Peoples and Forests has managed millions over the years and launched a new fund at COP26.

“This fund is based on the experience of the communities, and it comes with plenty of flexibility to react to their realities and not the priorities of the donors,” he said.

His organization works with thousands of communities across Mexico, and he stressed that not all of them have the same objectives.

“One community may want to engage in a more business-friendly model – by sustainably harvesting timber,  for example – while another may take a more purely conservational approach,” he said. “It’s crucial that funds come in with the flexibility to finance activities that support the goal of sustainable forest management and not the idealized goals of someone thousands of miles away.”

He added, however, that indigenous people must also continue making inroads in Western institutions such as the United Nations Framework Convention on Climate Change (UNFCCC), which inaugurated its Local Communities and Indigenous Peoples Platform (LCIPP) at the 2018 talks in Katowice.

In Glasgow, Parties adopted the LCIPP’s second three-year work plan, and Arara emphasized the need for Indigenous People to seize the moment – for their benefit and the benefit of the world.

“We need to learn how to engage bureaucracy and not just dismiss it,” she said before addressing the audience. “But we also need to remind people that we’re not here to be colorful props for the selfies you send home. We’re here because we’re doing the most to save the world and the forest, and you need us.”

What does the Article 6 Rulebook mean for REDD+?

Correction (20 December 2021): The article has been updated to reflect The Gold Standard Foundation’s current and updated approach to corresponding adjustments and credit issuances.

16 December 2021 | The carbon market community had eagerly—and excitedly as much as nervously—awaited the decisions on Article 6, attaching a lot of hope that these decisions would bring clarity to regulated as well as voluntary carbon markets. Agreement didn’t come easy as negotiators fought over the rules in 6.4 of the transition from the Clean Development Mechanism (CDM), the criteria for cooperative approaches, and whether a ‘share of proceeds’ for adaptation would apply to such approaches in 6.2.

However, the most contentious issue and greatest headache for market participants was the definition and application of ‘corresponding adjustments’ to Article 6 transactions and the impact of agreed rules on the voluntary carbon market. Further to these issues, friends of nature-based solutions saw themselves confronted with an additional set of worries—namely, how REDD+ would relate to Article 6 and whether nature-based solutions would be considered in the newly-defined cooperative modalities.

As countries close this chapter of multilateral negotiations and move on to contemplate how to implement what has been agreed, uncertainties about what these decisions mean outside of UN negotiation rooms create prevailing insecurities for practitioners. How international carbon markets will develop will depend a great deal on the desire in capital cities around the globe to embrace, regulate and engage in such markets. But with or without further elaboration by governments, Glasgow is the bearer of good news for those that have invested in voluntary markets, REDD+ and nature-based solutions in recent years. Here are my main takeaways for nature from the Article 6 rulebook:

REDD+ is eligible under Article 6.2 and 6.4 of the Paris Agreement.

The implementation guidance of Article 6.2 that defines criteria for ‘cooperative approaches’ and corresponding adjustments, and the rules and modalities for ‘Article 6.4 activities’ embrace all sectors and do not exclude any activities or methodologies. In doing so, they retract past discrimination against nature-based solutions by the CDM.

REDD+ activities, such as avoided deforestation or avoided conversion, afforestation and reforestation, or sustainable forest management, can be developed under both implementation modalities of Article 6 (Art. 6.2 and 6.4), provided that they comply with the respective international and national rules.

The modalities and procedures guiding Article 6.4 will be familiar to those market participants that remember the CDM. The Art. 6.4 Supervisory Body will have to approve methodologies that account for emission reductions and removals, and any activity must obtain host country approval to qualify for Article 6 transactions.

While nature-based solutions do not suffer from regulatory discrimination, it will take a while until they operate on a level playing field: They face the obstacle that they cannot rely on a body of accredited CDM methodologies, which are likely to be prioritized by the Article 6.4 Supervisory Body. The approval of methodologies for nature-based solutions may therefore take more time than the approval of methodologies that sit in the comfort zone of UNFCCC institutions.

Since Article 6 treats the land sector like any other sector, there is no special treatment.

REDD+ gets neither discriminatory nor preferential treatment. In a last-minute effort, the Coalition of Rainforest Nations led by Papua New Guinea wanted to secure a broad recognition of all REDD+ emission reductions generated under the Warsaw Framework for REDD+ (WFR) since its adoption in 2015, but this attempt failed. There were significant concerns about whether the WFR would meet the quality criteria of Article 6.2 or 6.4.

Instead of receiving a blank check, the forest sector, including REDD+ programs, must comply with Article 6 rules, like any other sectoral mitigation effort. Cooperation under Article 6.2 gives participating Parties significant flexibility to define the modalities of their engagement. To participate in an Article 6 transaction, Parties must comply with involved reporting requirements, and have the ability to account for mitigation outcomes, track carbon credits, and make corresponding adjustments.

Further, activities that do not generate emission reductions or removals cannot generate mitigation outcomes under Article 6. The Glasgow decisions clarify that “emissions avoidance”— formulated to respond to proposals to credit decisions not to extract fossil fuels, but also applicable to protect forests that are not under immediate threat—cannot generate any eligible mitigation outcomes.

The authorization of Article 6.2 mitigation outcomes and Article 6.4 emission reductions defines the need for corresponding adjustments.

All cooperative approaches and Art. 6.4 activities must be approved by host countries. Host countries also have to authorize companies and other non-state actors that participate in activities. Nothing new here. But Glasgow cut through the Gordian knot of corresponding adjustments by defining an additional authorization: Host countries can decide to authorize mitigation outcomes generated by Article 6.2 cooperative approaches and Article 6.4 emission reductions (A6.4ERs) for specific uses – some requiring a corresponding adjustments, others not.

Mitigation outcomes and A6.4ERs can be internationally transferred and used against another country’s NDC if so authorized. Countries can also authorize the use of emission reductions and removals for ‘other international purposes,’ generally understood to refer to offsetting schemes defined for international aviation or, in the future, international shipping. A third category of use authorizations cover ‘other purposes,’ which includes current voluntary carbon markets that generate credits that are used to offset company emissions. Any of such authorization requires a corresponding adjustment.

However, a host country “use authorization” specifying the destiny of a carbon credit is not mandatory. A government can decide to engage in cooperative approaches and approve Article 6.4 activities without authorizing the resulting emission reductions for specific (offsetting) uses. In the future, the market will see adjusted and non-adjusted Article 6 credits, including for nature-based solutions activities.

The voluntary carbon market remains independent from Article 6.

The Glasgow decisions do not include any explicit reference to voluntary carbon markets. Implicitly, the reference to ‘other purposes’ recognizes that private entities may participate in Article 6 transactions to meet corporate climate goals. The decisions do not judge whether these transactions should generate ‘adjusted’ or ‘non-adjusted’ credits (the various pathways for carbon credits are illustrated in the graph.) Instead, the Article 6 rulebook leaves this decision to the willingness of host countries to issue corresponding adjustments, to carbon standards and crediting programs to label or distinguish credits with an adjustment, and corporates to decide whether they wish to procure such credits.

 

 

Voluntary carbon market standards have reacted differently to the question of whether to back carbon credits with corresponding adjustments. The Gold Standard has said that it considers corresponding adjustments necessary for carbon offsetting and carbon neutral claims. In June, Gold Standard announced that it would update its claims guidelines to reflect this. Verra announced that it will issue carbon credits for voluntary action with or without corresponding adjustments.  Both standards will distinguish between adjusted and unadjusted credits in their registries. Gold Standard’s approach would mean that all adjusted credits used for offsetting claims would fall under the category of Article 6.2 mitigation outcomes or Art6.4ERs that, once authorized, become internationally transferred mitigation outcomes (ITMOs).  Verra, on the other hand, does not regulate the use of carbon credits and leaves it to other initiatives, such as the VCMi, to develop guidance on corporate climate claims.

Host countries need to carefully consider when to offer authorized ITMOs.

In contrast to the CDM where engagement for host countries came at little cost, Article 6 can affect a country’s ability to meet its NDC, particularly if the country authorizes an inordinate amount of corresponding adjustments. Host countries will therefore have to carefully evaluate when and under which conditions they will offer authorizations that trigger corresponding adjustments.

The inherent quid-pro-quo (investment against transfer) of authorized uses challenges the idea of ‘common-but-differentiated responsibilities and respective capabilities’ of the international climate regime as it raises the price of engagement for host countries. In this context, it is notable that corresponding adjustments must also apply to authorized emissions not covered by the host country’s NDC. In such cases, the country is effectively paying double for ITMOs related to emissions not covered by its NDC: It has to make a corresponding adjustment without benefiting from a corresponding emission reduction within the scope of its NDC. Countries will therefore have to be extremely strategic in these instances, ensuring that the transfer is worth the resulting carbon finance benefit.

For some time to come, corporate demand for voluntary carbon credits without use authorizations, including for nature-based solutions, is likely to remain strong.

With Glasgow, the typology of carbon transactions and resulting units has increased significantly:  in time, there will be trades in adjusted and non-adjusted A6.4ERs, adjusted mitigation outcomes from Article 6.2 cooperative approaches, voluntary units with or without adjustments that fall under Article 6.2 or Article 6.4, or voluntary units with no direct link to Article 6. Eventually, the different categories of credits may allow voluntary standards and buyers to develop sophisticated portfolios of credits meeting different offsetting and non-offsetting needs.

However, considering the complexity of approvals and authorizations that comes with implementing Article 6 activities, the voluntary carbon market that operates separately from Article 6 is likely to remain the venue of choice for many corporate buyers, at least in the near term. It may be several years before host countries will be eligible and able to design Article 6.2 approaches, approve Article 6.4 activities, and comply with the rules governing corresponding adjustments.

Jurisdictional REDD+ seems to be a predestined cooperative approach under Article 6.2.

While nature-based solutions start with a handicap when it comes to approvals under Article 6.4, it enjoys a head start in the design of cooperative approaches under Article 6.2. The engagement of countries in jurisdictional REDD+ makes it a ready-made category for Article 6.2 cooperative approaches. Through existing implementation guidance by voluntary standards (JNR or ART/Trees) and multilateral programs (FCPF, GCF) countries are familiar with quality criteria of large-scale programs.  Many countries are in the process of developing jurisdictional programs, and guidance on nesting ensures that they can integrate voluntary carbon market projects in larger programs.

A REDD+ cooperative approach could consist of a jurisdictional program that generates adjusted and non-adjusted mitigation outcomes, and integrates voluntary carbon market and, in the future, Article 6.4 activities. While cooperative approaches enable the cooperation between two or more countries, REDD+ countries could also develop unilateral cooperative approaches that meet the requirements of Article 6.2 and are implemented in cooperation with authorized private entities. In parallel, project developers and other parties can submit avoided deforestation and other nature-based solutions methodologies for approval by the Article 6.4 Supervisory Board and develop activities under Article 6.4.

However, meeting the different accounting requirements of Article 6 will take time; time during which forests may be lost and ecosystems wait to be restored. It is therefore essential that investors do not halt their activities in expectation of the Article 6 requirements being fulfilled. The voluntary carbon market has grown rapidly in recent years, and remains nature’s best (albeit imperfect) chance to enjoy the support of international finance in the short term. Unfortunately, the climate crisis does not endow us with time to waste. Forests need to be protected based on the tools and mechanism that are available at any given moment. Invest in nature now!

Now Available: CORSIA Carbon Market Data from Ecosystem Marketplace
ICAO Environment CORSIA Newsletter

1 December 2021 | Today’s edition of the CORSIA newsletter marks the first publishing of data on carbon market transactions of CORSIA-eligible emissions units, following the August 2021 announcement on the ICAO-EM partnership (Ecosystem Marketplace (EM) is a non-profit initiative of Forest Trends). The information presented by EM here aims to enhance States’ and stakeholders’ understanding of the development of carbon markets, and to help States to better understand the effects of CORSIA on the international aviation sector.

EM has aggregated and anonymized reported carbon market transactions of CORSIA-eligible emissions units for 2020 and 2021 YTD. Information encompasses transactions as of 5 November 2021 from American Carbon Registry (ACR), Clean Development Mechanism (CDM), Climate Action Reserve (CAR), Gold Standard (GS), and Verra. In the table below, EM has provided annual summaries and totals for project categories derived from projects located in 17 countries in the geographic regions of Africa, Asia, Europe, Latin America and Caribbean, and North America.

When comparing the transaction periods of 2020 (1 January – 31 December) and 2021 YTD (1 January – 5 November), buyers have paid significantly different prices for CORSIA-eligible units ranging from less than USD 0.50/tCO2eq to more than USD 45.00/tCO2eq. The weighted average price for All Categories has dropped from USD 4.89/tCO2eq in 2020 to USD 3.08/tCO2eq in 2021 YTD. This drop is mostly attributed to an increased number of transactions of lower-priced Renewable Energy units in 2021 YTD. The weighted average price of CORSIA eligible Forestry and Land Use units has increased by about 26% between 2020 and 2021 YTD. This group of projects includes Improved Forest Management, Afforestation, and Reforestation. The shift in price was mostly driven by Improved Forest Management, the average price of which jumped by about 53%. More details can be found on the EM website.

As EM Respondents continue to report trade data to Ecosystem Marketplace, updated prices will be included in future editions of this newsletter.

View the data in EM’s Data Intelligence and Analytics Dashboard.

 

 

 

 

Article 6 and its Glasgow Rulebook: the Basics

16 November 2021 | Six years after negotiators adopted the Paris Climate Agreement, they finally completed the rulebook for implementing it at year-end climate talks in Glasgow (COP26) — an event that was supposed to happen three years ago, at the 2018 climate talks in Katowice, Poland (COP24).

The sticking point was Article 6, which became a lightning rod in Katowice and a dud in Madrid in 2019 before negotiators finally wrapped it up in Glasgow, with existential sticking points resolved and a few stubborn ones assigned to working groups for the coming year.

Article 6 is central to the agreement because it guides how countries cooperate to generate cheaper — and, thus, deeper — greenhouse gas reductions. In so doing, it should lead to more ambitious national climate action plans, which are called “Nationally Determined Contributions” (NDCs).

In 2019, the International Emissions Trading Association (IETA) looked at the NDCs then on the table and concluded that cross-border coordination in the form of carbon trading could cut the cost of meeting NDCs in half by 2030 – making it possible to cut emissions 50 percent deeper at no additional cost.

Internationally Transferred Mitigation Outcomes (ITMOs)

In the Paris Agreement, emission reductions that pass from one country’s greenhouse gas inventory to another country’s inventory are called Internationally Transferred Mitigation Outcomes (ITMOs).

Like all carbon credits, ITMOs are created by projects that either reduce emissions or remove gasses in one place, with the payments coming from another place.

They become ITMOs when those places are in different countries and the reduction is transferred from one country’s national greenhouse-gas inventory to another country’s greenhouse-gas inventory. This can happen at the government level, for example as when Switzerland purchased ITMOs from Peru. However, it’s more likely to happen at the corporate level when a company in one country purchases ITMOs from abroad to meet compliance criteria at home.

The Article 6 rulebook requires “corresponding adjustments” (CAs) when an ITMO is passed in this way.

A corresponding adjustment means that the “host” country, or the country where the carbon project is located, must first authorize the transfer and then adjust its own greenhouse gas inventory to reflect the fact that the emission reduction achieved inside its borders is being credited to another country. The buying country then adjusts its greenhouse gas inventory by the same amount.

Many developing countries, however, say they don’t want to transfer emission reductions abroad, and ITMOs aren’t the only international carbon assets.

Voluntary Emission Reductions

Voluntary Emission Reductions or Verified Emission Reductions (VERs) are emission reductions generated in the voluntary carbon market (VCM), and they don’t have to be entered into a national inventory because they aren’t created to meet a legal requirement. A host country can, if they choose, apply a corresponding adjustment to VERs that leave its border, but this is not required.

The VCM encompasses all transactions of carbon offsets that are not purchased with the intention to surrender into an active regulated carbon market. It does include offsets that are purchased with the intent to re-sell or retire to meet net zero, carbon neutral, or other climate claims.

In a cross-border voluntary transaction, a company in one country – say, Germany – can reduce its footprint by purchasing credits from a project in another country – say, Brazil – but the German company cannot use the credit to meet its legal requirements in Germany. Any reductions in greenhouse gas emissions are reflected in the activities on the ground in the host country, and that’s where they stay.

Some NGOs have advocated for imposing corresponding adjustments on voluntary carbon transactions, and there is a lively debate over what sorts of claims the buying company can make, but the Article 6 rulebook makes no reference to voluntary markets. For a deep dive, see “Corresponding Adjustments for Voluntary Markets – Seriously?

The Kyoto Legacy

To understand some of the confusion on Article 6, it helps to look back at the Kyoto Protocol and its Clean Development Mechanism (CDM), which was a centralized hub for executing cross-border compliance trades. Under the Kyoto Protocol, developing countries had no commitments, so no corresponding adjustments were necessary. In the lead-up to the signing of the Paris Agreement in 2015, many developing countries were surprised to learn they’d have to transfer their emission reductions abroad if selling ITMOs, and few have done so. This has led to an appetite for performance-based finance and voluntary transactions.

Also, the CDM included a transaction fee to finance its own operating costs and support the Adaptation Fund, which helps developing countries adapt to climate change. This fee is mentioned in Article 6.4 as of the Paris Agreement but not Article 6.2, which we’ll get to below.

Finally, the CDM generated an oversupply of credits, which several countries — primarily Brazil, China, India, and South Korea — wanted to see recognized in the CDM successor, while most countries were reluctant to let them in.

Paragraph 6.2 and its Rules

Paragraph 6.2 provides an accounting framework for bilateral and multilateral transfers, including programs that link the emissions-trading schemes of two or more countries. Here is the complete text of the paragraph:

Parties shall, where engaging on a voluntary basis in cooperative approaches that involve the use of internationally transferred mitigation outcomes towards nationally determined contributions, promote sustainable development and ensure environmental integrity and transparency, including in governance, and shall apply robust accounting to ensure, inter alia, the avoidance of double counting, consistent with guidance adopted by the Conference of the Parties serving as the meeting of the Parties to this Agreement.

Click here to view the 6.2 rulebook

The paragraph doesn’t create a trading system itself but instead provides a framework within which countries can create their own systems in ways that are consistent with UN rules and comparable to each other.

In the early days of the Glasgow talks, the most contentious issue focused on whether or not to implement a transaction fee to pay for adaptation in developing countries. Such a “share of proceeds” provision exists in Paragraph 6.4, as we mentioned above, but most developed countries pushed back on this provision, arguing that it was impossible to implement in a unified and fair way given the diversity of approaches being developed under 6.2.

The transaction fee didn’t appear in the final draft, but there is an invitation for the Adaptation Fund “to report in its annual reports to the CMA (the group of the countries who have signed and ratified the Paris Agreement) on funding related to participation in cooperative approaches.”

Negotiators also deemed several technical issues in need of further review, and these were assigned to the Subsidiary Body for Scientific and Technological Advice (SBSTA), which is a technical negotiating track that helps inform the next COP agenda. Among these are the treatment of corresponding adjustments after 2030, whether ITMOs can include reductions or be limited to removals, and how to handle corresponding adjustments for single-year NDCs. Ironically, single-year NDCs are more difficult than multi-year NDCs because the longer-term NDCs run on a carbon budget approach similar to the Kyoto Protocol.

The issue of reductions vs removals emerged in recent reports by the Intergovernmental Panel on Climate Change (IPCC), which has concluded that we must dramatically increase removals by 2050 to meet the climate challenge. Existing carbon credits tend to focus on activities that reduce emissions, activities that remove gasses were seen as a future activity. There is, however, an active debate among NGOs as to how to strike the balance between strategies that use ITMOs to support removals and those that use them to support reductions.

Paragraph 6.4 and its Rules

Paragraph 6.4 establishes a centralized hub to replace the CDM, and the biggest points of contention coming into Glasgow were whether countries would have to correspondingly adjust their carbon accounts when transferring emission reductions into non-Paris accords, such as the CORSIA program for international passenger flights, and the degree to which Certified Emission Reductions (CERs) generated under the CDM could be applied towards NDCs. Here is a complete text of the paragraph:

A mechanism to contribute to the mitigation of greenhouse gas emissions and support sustainable development is hereby established under the authority and guidance of the Conference of the Parties serving as the meeting of the Parties to this Agreement for use by Parties on a voluntary basis. It shall be supervised by a body designated by the Conference of the Parties serving as the meeting of the Parties to this Agreement, and shall aim:

  1. To promote the mitigation of greenhouse gas emissions while fostering sustainable development;
  2. To incentivize and facilitate participation in the mitigation of greenhouse gas emissions by public and private entities authorized by a Party;
  3. To contribute to the reduction of emission levels in the host Party, which will benefit from mitigation activities resulting in emission reductions that can also be used by another Party to fulfill its nationally determined contribution; and
  4. To deliver an overall mitigation in global emissions.

Click here to view the rulebook

The stickiest issue was resolved on the night of November 12, when Brazil agreed to require corresponding adjustments on all new emission reductions generated under Paragraph 6.4, breaking a logjam that had existed since 2015. For background, see “Will Double-Counting Dust-Up Crush Katowice Climate Conference?

In a compromise that’s been widely criticized, however, the rulebook sets out criteria for countries to use CERs from projects registered after January 1, 2013 to meet their first NDC or first adjusted NDC, with no corresponding adjustment since the CDM predates that requirement. It designates a 12-member Supervisory Body to oversee the emerging hub and tasks it with reviewing baselines of recognized credits.

The total number of pre-2020 CDM credits meeting the criteria is just over 100 million, and their date will be clearly labeled. Most participants are encouraging buyers to avoid using them in their NDCs, even if they can legally do so. For details, see “Glasgow Outcome: Ambitious Carbon Market Rules”.

The rules may be written, but they will certainly be subject to deeper interpretation than we can offer here. Get ready for another interesting year.

Further Sources

Decoding Article 6, Version 2”, a deep dive from the Asian Development Bank

Article 6 Handbook”, from Carbon Mechanisms

Or watch the video below from Perspectives.cc

What COP26 Means for Forests and the Climate

12 November 2021 | Dubbed the “Nature COP,” forests were front and center throughout the UN climate summit (COP26) this year. Among the first and most significant announcements made at COP26 was the Glasgow Leaders’ Declaration on Forests and Land Use, in which 137 countries committed to collectively end forest loss and land degradation by 2030.

Panellists speaking at the Forest event at the SEC at COP26 in Glasgow
Above: Panellists speaking at an event on forests at COP26 in Glasgow. Photo by Karwai Tang/ UK Government

This pledge was followed by scores of forest-related announcements — including significant funding commitments from countries and foundations to support conservation of tropical forests, the communities best positioned to steward them, and the restoration of degraded land. Meanwhile, companies and investors pledged to reduce forest loss and support a transition to more sustainable land-use within their supply chains and financial portfolios.

What does this mean for forests and climate action? We walk through the numbers.

What Was Promised on Forests at COP26?

Countries signing on to the Glasgow Declaration affirmed the importance of all forests in limiting global warming to 1.5 degrees C (2.7 degrees F), adapting to the impacts of climate change, and maintaining healthy ecosystem services. They agreed to collectively “halt and reverse forest loss and land degradation by 2030 while delivering sustainable development and promoting an inclusive rural transformation,” without saying exactly what they would do to achieve this goal.

Funding pledges followed the declaration. A total of $19.2 billion ($12 billion from public sources and $7.2 billion in private financing) was pledged to help protect and restore forests globally. This included $1.7 billion to help Indigenous peoples and local communities exercise decision-making and design roles in climate programs and finance instruments.

New ways of doing business were promised. A group of 28 countries pledged to protect forests while promoting development and trade through the Forest, Agriculture and Commodity Trade Roadmap. Twelve companies with a major global market share in commodities such as soy, palm oil, cocoa and cattle, also committed to halt forest loss associated with agricultural commodity production and trade.

And financial institutions rose to the occasion. More than 30 financial institutions managing over $8.7 trillion in assets committed to work on eliminating agricultural commodity-driven deforestation risks in their investment and lending portfolios by 2025.

How Could These Forest Commitments Help Achieve Global Climate Goals?

A rapid reduction in forest loss is critical to preventing irreversible biodiversity loss and securing the rights, livelihoods and cultural heritage of the Indigenous peoples and local communities who live in and around forests vulnerable to deforestation. Forests also play a massive role in the fight against climate change. But what are the climate benefits to be had if all signatories to the Glasgow Declaration were to make good on their commitments?

Here’s a breakdown:

Emissions Avoided by Ending Forest Loss

We compared such success to a business-as-usual scenario to estimate the potential greenhouse gas mitigation impact of the Glasgow Declaration. Ending forest loss by 2030 within all the signatory countries would offer 32.8 million hectares of avoided loss and 18.9 gigatonnes of carbon dioxide equivalent (GtCO2e) in avoided emissions. That’s an area roughly the size of Malaysia and equivalent to a quarter of global greenhouse gas emissions from transportation from 2009-2018.

Approximately 98% of the estimated avoided emissions are in the tropics, while the remaining 2% are in other climate domains. Nearly three quarters of these avoided emissions are in just three countries: Brazil, Indonesia, and the Democratic Republic of the Congo.

 

 

How we read the data

Our estimates are derived from historical tree cover loss data. We differentiate tree cover loss that is more likely to be permanent (which we count as forest loss) from tree cover loss that is more likely to be temporary, and not associated with land-use change (which we do not count as forest loss).

To estimate global forest loss, we approximate the proportion of global tree cover loss that is likely to be permanent (i.e., where tree cover loss is associated with conversion of forests to new, non-forest land uses). This proxy uses data on the drivers of tree cover loss to estimate all tree cover loss driven by commodity production and urbanization, as well as tropical primary tree cover loss driven by expansion of small or medium-scale agriculture.

Tree cover includes woody vegetation with a height of at least 5 meters and a canopy density of at least 30% at a 30-meter Landsat pixel scale. Although wildfires and forestry are also major causes of tree cover loss and associated emissions, they are typically more temporary in nature and not associated with permanent land-use change. They are not considered as “forest loss” for the purposes of this estimate. Learn more about how we designate tree cover loss classes on the Global Forest Review.

To estimate the business-as-usual scenario, we extrapolated the 2015-2020 annual average forest loss and associated emissions for each signatory country up to 2030 and aggregated across all signatory countries. To calculate avoided forest loss and associated avoided emissions, we compared this business-as-usual scenario to a linear reduction in forest loss from 2022-2030.

This analysis does not consider overlaps with other Glasgow commitments, including Nationally Determined Contributions (NDCs) and net-zero pledges, and therefore does not make claims regarding the extent to which the avoided emissions from the Glasgow Declaration are additional to those commitments.

 

Climate Mitigation from Protecting Standing Forests

Ending the emissions released into the atmosphere from deforestation would be a huge climate win, but forests have even more climate potential to offer. As forests grow, they sequester more carbon from the atmosphere: Data shows that between 2001-2020, forests around the world sequestered an average of 7.3 GtCO2e per year. When these forests are removed, the carbon sink provided by them is also lost, reducing future carbon removals.

Halting forest loss in the Declaration’s signatory countries will secure the carbon removals that would have been lost had the current pace of forest loss continued. The carbon removals that would have been forgone under the business-as-usual scenario are approximately 0.47 GtCO2e by 2030 — equivalent to the removal of one year’s worth of  CO2e emissions from manufacturing and construction in the U.S.

Climate Benefits from Restoration

The goal of the Glasgow Declaration is not just to halt forest loss and land degradation, but to “reverse” it. Signatories pledged to strengthen efforts to accelerate the restoration of forests and other terrestrial ecosystems, but stopped short of setting a quantitative target for how much to restore. Many of the signatory countries have also made commitments under the Bonn Challenge, which has a goal of bringing 350 million hectares of degraded and deforested landscapes into restoration by 2030.

Restoration of forests, mangroves and peatlands offers great climate mitigation potential, in addition to the emissions avoided by halting their loss or degradation. To demonstrate the magnitude of this potential, here are estimates on the amount of carbon dioxide that could be removed annually from the atmosphere by 2030 from several forms of restoration (via a recent report on the transformations required to limit global warming to 1.5 degrees C):

  • 3.0 GtCO2e from reforesting 259 million hectares,
  • 0.4 GtCO2e from restoring 22 million hectares of peatlands,
  • 0.2 GtCO2e from restoring 7 million hectares of coastal wetlands.

Socially and ecologically conscious restoration will require close collaboration with communities that own or use land. Regional networks of community organizations, investors and governments — like Initiative 20×20 in Latin America and the newly relaunched AFR100 in Africa — can help to share knowledge and channel large financial commitments, such as The Bezos Earth Fund allocation of $1 billion for restoring landscapes, to local entrepreneurs and community groups working to restore land.

This Isn’t the First Pledge on Forests. What Will Make the Outcome Different?

What will prevent the Glasgow Declaration and related pledges from suffering the same fate as previously unmet forest commitments? To be sure, many of the same countries also signed the 2014 New York Declaration on Forests which pledged to halve deforestation by 2020 and end it completely by 2030. Despite some progress, the latest assessment shows signatories are still far from achieving this objective. For the Glasgow Declaration to succeed, its goals need to be embedded in new ways of doing business, and countries must feel fully accountable for achieving them.

Moving beyond a paper pledge to impact will require countries to work in concert to drive system change across all five areas of “transformative action” listed in the declaration: sustainable production and consumption; infrastructure; trade; finance and investment; and support for smallholders, Indigenous peoples and local communities, and their role in forest stewardship.

For this to happen, countries and companies must be accountable for following through on their pledges. They should develop clear implementation plans, specify measurable performance indicators, and set specific milestones of achievement on the pathway to 2030 goals. They should openly and regularly monitor, report and verify their progress. They should also be more transparent — the boundaries and owners of land-use permits or licenses should not be secret and companies should trace and disclose the origins of commodities they purchase.

While the Glasgow Declaration and related pledges are a welcome affirmation of political will to reduce deforestation and pivot to more sustainable land use, we’re watching for action.

Endnote:

Estimates of forest loss are derived using data from Hansen et al. 2013Curtis et al. 2018, and  Turubanova et al. 2018; estimates of avoided emissions were calculated based on forest greenhouse gas fluxes data from Harris et al. 2021.

Carbon Market Rules Formally Enshrined in Glasgow Package

Published 11:27 GMT on November 13, 2021  /  Last updated at 19:38 GMT on November 13, 2021

GLASGOW | 13 November 2021 | In approving the Glasgow Package, world leaders have formally approved rules for implementing Article 6 of the Paris Climate Agreement. The rules were finalized Saturday morning, and the package was adopted in the final plenary of the 26th Conference of the Parties (COP26) to the United Nations Framework Convention on Climate Change (UNFCCC) here.

Article 6 itself was ratified along with the rest of the Paris Agreement in 2016, but the rules for implementing it proved complex and elusive.

Article 6 covers the ways countries can work together to generate deeper emission reductions and produce more ambitious national climate action plans, called “Nationally Determined Contributions” (NDCs) to the Paris Agreement. It includes cross-border compliance carbon markets, described as “ITMOs” (Internationally-Transferred Mitigation Outcomes).

The final agreement resolves sticky issues associated with paragraphs 2 and 4 of the article. Paragraph 2 covers bilateral carbon trades, while paragraph 4 covers the centralized hub that replaces the Kyoto Protocol’s Clean Development Mechanism (CDM).

To avoid double-counting of emission reductions, the Paris Agreement calls for rules on applying “corresponding adjustments” of national carbon inventories when one country uses ITMOs to reduce its carbon footprint. This can happen at the government level, as when Switzerland purchased ITMOS from Peru, but is more likely to happen at the corporate level, when a company in one country purchases ITMOs from abroad to meet compliance criteria at home.

Voluntary carbon markets are also designed to reduce overall emissions, but the transactions themselves are not registered in national carbon accounts. As a result, they do not require corresponding adjustments at this time. This is a subject we will revisit in the coming days.

Paragraph 6.2 Summary

Click here to view the text

Article 6.2 covers rules for bilateral and multilateral transfers between countries. In the early days of the Glasgow talks, the most contentious issue focused on whether or not to implement a transaction fee to pay for adaptation in developing countries. Such a “share of proceeds” provision exists in Paragraph 6.4, which focuses on the creation of a central hub to replace the Kyoto Protocol’s Clean Development Mechanism (CDM). Most developed countries pushed back on this provision, arguing that it was impossible to implement in a unified and fair way given the diversity of approaches being developed.

The transaction fee doesn’t appear in the current draft, but there is an invitation for the Adaptation Fund “to report in its annual reports to the CMA on funding related to participation in cooperative approaches pursuant to paragraph 36 of chapter VII of the annex (Ambition in mitigation and adaptation actions).”

The corresponding adjustments are easier for multi-year NDCs because they run on a carbon budget approach similar to the Kyoto Protocol, making the account easier. Single-year NDCs are more difficult and will need more technical work. This will be taken up by the Subsidiary Body for Scientific and Technological Advice (SBSTA), which is a technical negotiating track that accepts requests from the Conference of the Parties (COP) and also helps inform the next meeting’s agenda. Among these are the treatment of corresponding adjustments after 2030 and whether ITMOs can include reductions or be limited to removals.

The Intergovernmental Panel on Climate Change (IPCC) has concluded that we must dramatically increase removals by 2050 to meet the climate challenge, and there is an active debate among NGOs as to how to strike the balance between strategies that use ITMOs to support reductions and those that use them to support removals.

Paragraph 6.4 Summary

Click here to view the text

Paragraph 6.4 covers the creation of a centralized hub to replace the CDM, and the biggest points of contention coming into Glasgow were whether countries would have to correspondingly adjust their carbon accounts when transferring emission reduction abroad and the degree to which Certified Emission Reductions (CERs) generated under the CDM could be applied towards NDCs.

The proposed text sets out criteria for countries to use CERs from projects registered after January 1, 2013 to meet their first NDC or first adjusted NDC, with no corresponding adjustment since the CDM predates that requirement. It designates a 12-member Supervisory Body to oversee the emerging hub and tasks it with reviewing baselines of recognized credits.

Earlier in the week, negotiators had agreed to require corresponding adjustments on all new emission reductions generated under Paragraph 6.4, breaking a logjam that had existed since 2015.

Experts Speculate that Article 6 Rules will Pass Once Finance Package is Agreed

GLASGOW | 12 November 2021 | Negotiators and observes are increasingly optimistic about the prospect of achieving a viable set of rules for implementing Article 6 of the Paris Agreement before year-end climate talks (COP26) end here over the weekend, although some details may be put to a working group for consideration over the course of the year.

“In this morning’s text, the principle decisions are all there, and I assume Article 6 will go to plenary once the finance decisions are reached,” said former Dutch negotiator Jos Cozijnsen, who now serves as a legal advisor to the Carbon Neutral Group.

Norwegian Prime Minister Jonas Gahr Støre seemed to make a similar statement when he told the Norwegian Broadcasting Corporation that “If we get the financing done, Article 6 will be done as well.”

Ecosystem Marketplace was unable to speak directly with Støre.

Cozijnsen acknowledged that some sticky issues remain – primarily whether to charge a transaction fee on internationally-transferred mitigation outcomes (ITMOs) under Article 6.2 of the Paris Agreement to fund adaptation, and the fate of old Clean Development Mechanism (CDM) credits.

“I can see an agreement in principle on both issues, with details put off to a working group,” he said.

A transaction fee already exists under Article 6.4, which covers the central hub for transferring credits, but Article 6.2 is more challenging because of the diversity of arrangements. The US state of California and the Canadian province of Quebec, for example, already engage in cross-border trading, while several “carbon clubs” are in various stages of development around the world.

“It would be hard to implement, but not impossible, and there comes a time where you just have to say, ‘Let’s make a deal,’” Cozijnsen said.

It is not uncommon for rulebooks to be approved with some provisions assigned to working groups for the following year, and Cozijnsen added that a triage mechanism could be created for old CDM credits, with only some of them going into the 6.4 hub.

Adaptation funding increased dramatically in Glasgow, with $351 million being pledged for the adaptation fund and the broader negotiating text calling for the creation of a dedicated agency to manage climate-linked loss and damage within two years.

This would be separate from the $100 billion per year for both adaptation and mitigation that rich countries have pledged to developing countries – a pledge that looks likely to finally be achieved in 2022.

 

Breaking: New Carbon Markets Text Shows Progress on Article 6.4, but 6.2 Remains Stalled

GLASGOW | 12 November 2021 | As year-end climate talks enter their final day, clear rules have emerged for internationally transferred mitigation outcomes (ITMOs) transferred via a central hub under Article 6.4 of the Paris Agreement, which is now seen as the successor to the Kyoto Protocol’s Clean Development Mechanism (CDM).

As a negotiating text, this is subject to change.

The new text for Article 6.4 shows agreement on the need for host countries to apply a corresponding adjustment for emissions reductions transferred via the hub, as Brazil agreed to drop its insistence on a grace period for such adjustments, abandoning a stance it had held since the Paris Agreement was signed in 2015.

For background, see “Will Double-Counting Dust-Up Crush Katowice Climate Conference?

Meanwhile, several negotiators have told Ecosystem Marketplace that they see Article 6 as neutral on whether corresponding adjustments should be required for voluntary transactions, which is contrary to the interpretation many market participants have made.

“In Article 6, there is a differentiation between offsets that take place inside an NDC and outside an NDC, but that’s related to aviation and other semi-compliance markets and not to voluntary markets,” said one negotiator, speaking on condition of anonymity.

“The issue of corresponding adjustments and voluntary markets has been overblown,” he said.

There are still several unresolved issues, including provisions for imposing a transaction fee on transfers that take place under Article 6.2, which governs bilateral trades between countries. The transaction fee, technically referred to as a “share of proceeds” (SOP) provision, is intended to fund adaptation in developing countries. Such a fee is already included in the centralized hub under 6.4, but many say it would be unworkable in a multilateral market under Article 6.2.

The second issue is roughly 4 million tons of emission reductions generated under the Kyoto Protocol’s Clean Development Mechanism (CDM). Countries that generated many of these credits, including Brazil, China, and South Korea, want them to be recognized under Article 6.4, while most other countries do not.

Carbon Market Talks Remain Stalled

GLASGOW | 11 November 2021 | Ministers released a negotiating text for Article 6, which deals with international carbon markets, but the rules are virtually unchanged since Saturday, with areas of disagreement in brackets. You can find the documents here:

At issue is the treatment of transactions outside of NDCs and whether a transaction tax should be imposed on bilateral transactions to support adaptation.

Unlike years past, we are avoiding the gossip surrounding these final days and awaiting a concrete outcome.

Voluntary Carbon Markets Top $1 Billion in 2021 with Newly Reported Trades,
a Special Ecosystem Marketplace COP26 Bulletin

10 November 2021  |  As the UN Climate Change talks at COP26 continue this week, Ecosystem Marketplace (EM) has prepared this special State of the Voluntary Carbon Markets (SOVCM) bulletin update from our first installment of SOVCM 2021 that was published on September 15th. This bulletin follows our commitment to expand our Global Carbon Hub by working more consistently with carbon credit market participants and stakeholders as an on-demand centralized repository of over the counter (OTC) and exchange-based trades, more regular EM publications with updates on the latest trades and trends in carbon markets, and more intelligent access to EM Data via EM’s online data dashboards and tools.

In addition to EM’s unique offering of VCM and compliance market trade data and insights from a global network of nearly 180 EM Respondents reporting on projects located in over 80 countries, the EM Data Intelligence & Analytics Dashboard includes data from 14 carbon standards’ registries, as well as corporate climate commitment and carbon credit claims insights (in testing within the EM Respondent version only at this time). Contact us here to speak with our team for a demo.

The headline from ‘Markets in Motion’, State of the Voluntary Carbon Markets 2021, Installment 1, was that the size of the voluntary carbon market was on track to hit (and exceed) $1 billion in value by the end of 2021 within a calendar year for the first time in EM’s 16-year history tracking the markets. This was based on data demonstrating that total 2021 VCM value was already at $748 million (as reported by EM Respondents by August 31), which was just shy of the first three quarters of the year.

Based on recently reported trades by EM Respondents (listed below), the VCM has now exceeded the $1 billion milestone. These additional 59.1 MtCO2e of 2021 VCM carbon credit trades have a corresponding market value of $258.2 million. Note, this data is a combination of carbon credit trades for the full calendar year, if they hadn’t yet reported to EM in 2021, and newly contracted trades since August 31st, which was the cutoff reporting date for the first installment.

When breaking down the newly reported 2021 transactions into their underlying categories, we again see that Forestry and Land Use credits and Renewable Energy credits dominate volume traded. Forestry and Land use credits account for 61% while Renewable Energy credits account 38% of transactions reported.

Projects with accompanying co-benefits have again fetched a higher average weighted price at $5.95 per tonne while projects without had a weighted average price of $2.77 per tonne.

What else you need to know

These additional transactions occurred throughout 2021, not exclusively since August 31, as EM Respondents catch up on reporting transactions throughout the year. It is important to note that this latest data comes from a small but important subset of respondents; we made a special request to our network of respondents to provide updates to inform COP26. This new data comprises only 15 respondents, 3 of which told the EM team that they were sold out and won’t have new trades to report until their next issuance.

The full set of 2021 transactions will be fully compiled likely by the end of Q1 2022 to accommodate EM Respondents that report at an annual frequency. However, even this updated set of transactions, representing less than 10% of the respondents that provided data for the previous report, increased the total volume traded in 2021 by an additional 20% and an increase in 35% of the previously reported market value.

It should be noted also that additional trades reported by these EM Respondents increased 2020 volumes by 71.6 MtCO2e at a value of $309.5 million for an average weighted price of $4.32 per ton.